Is Forex Trading Just Another Form Of Gambling?

I was chatting to this guy last weekend and when I told him I make a lot of my income from forex trading, he looked visibly shocked and then said “Really? Isn't forex trading just another form of gambling?”

It was a fair question, and it certainly made me pause for a few seconds. After all how can you argue that it's not?

When you enter a position there are only two possible outcomes - the price can go up or the price can go down. Therefore even pure gamblers stand a good chance of making some money without any knowledge or experience of how the forex markets work.

However, the answer I came up with went something like this:

“Yes in a way I suppose you could argue that forex trading is a form of gambling, but the great thing about forex trading is that a lot of it is based on human behaviour and psychology, which is where technical analysis and charting comes into play. If you watch the markets you will see the same patterns repeating themselves over and over again, and similarly the price will often react in a similar manner to certain technical indicators because so many human traders all over the world follow the same indicators, which is where you can give yourself an edge and make a regular income. Whenever I take a position, it's always backed up by a combination of technical indicators being in my favour, so there's always a high probability that my trade will be a winning one”.

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Is Forex Trading Really For You?

The trouble with being a full-time forex trader is that it can be a very lonely profession if you're trading your own account at home.

Everyone thinks it's an exciting, exhilarating profession sitting at your computer in your underwear watching the markets, going long, going short, raking in huge profits, but the reality is somewhat different.

You can sit staring at your computer screen for hours on end waiting for a good set-up to enter a trade, and sometimes you can sit there for the whole day and not enter a trade. And even if you do find a trade, when it goes against you and you have to close out at a loss, then it's a gut-wrenching feeling. You've wasted a whole day, and not only have you not earned any money, but you've actually lost money. You could have made more money working a menial job for the minimum wage that day.

Also in most cases you're all alone and therefore have no work colleagues. You have no social interaction at all during the day except to maybe exchange pleasantries with the postman or to go down to the newsagents for a paper. Over many months and years this lack of social interaction can be quite depressing, especially if you are a naturally social person. Talking to traders on a forum or a load of pretend friends on Facebook is no substitute for real human interaction.

There will also be lean times for even the most profitable traders, which can be extremely stressful, particularly if you have mortgage payments to make, bills to pay, and a family to support.

Yes the potential profits you can make are almost limitless thanks to leverage and compounding, but it's a very tough, and often very stressful way of making a living.

Saying all that though, I've been working for myself since 2001, with forex trading contributing greatly to my overall income and I absolutely love it. Admittedly the lack of social interaction isn't really an issue as I don't really like people generally.

In all seriousness though, if you can learn to trade successfully then you will be very well rewarded financially, which will allow you to have a great social life away from your computer screen and you can enjoy the benefits of being your own boss and the maker of your own destiny.

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Good News For Income Investors

Looking for good news in today's markets is like searching for the proverbial needle in a haystack. Needless to say, practically all investment grade equities and nearly all closed end funds that specialize in providing regular recurring monthly income have been reduced in market value by this prolonged correction. The quake has spread in all directions from its financial epicenter, and the mounting doom and gloom has taken its toll on even the most rational investment decision makers. Try to keep in mind that the purpose of income investing is the income that your portfolio produces not an increase in the securities' market values---

So here's the good news (and for anyone with a 40% or higher income asset allocation, or an income portfolio being used for living expenses), it really is very good news. Base income levels, from the beginning of the stock market correction in June '07 until mid-July '08, have barely changed at all. In fact, they have probably risen in properly asset allocated portfolios. I have examined the regular recurring monthly income distributed by 56 taxable income CEFs and 61 tax-free income CEFs, and the conclusions are pretty remarkable.

In spite of the fact that the vast majority of my favorite monthly income producers are lower in market value than I would like, the amount of income they are distributing to shareholders has not moved lower meaningfully--- even though the Federal Reserve has reduced interest rates by approximately 60% during the past twelve months. Here are the numbers: (1) 48% of the taxable-income CEFs are distributing precisely the same amount per share as they did a year ago. Fourteen issues have increased their payouts and fifteen have reduced them.

The net result is a decrease of just fourteen cents (2.5% of the total monthly payout). The average current yield on the portfolio, as of mid July '07, is 9.86% without considering any capital gains distributions. Additionally, the group is selling at market prices that reflect an average discount of nearly 11% from NAV. Is that special or what? The bonds, preferred stocks, government securities are priced 11% below their current market values.

(2) The numbers are similar with regard to the 61 tax-free income CEFs: 46% have not altered their payout over the past twelve months; eighteen have reduced their payout slightly, and 15 have increased the monthly dole. The net difference for the group over the past year is less than one cent, or a percentage change of two-tenths of one percent. Remarkable. This group is selling at an average discount from NAV of 9.1% and has a current tax-free yield of 5.51%.

(3) Of 117 individual issues, about half have produced stable income. The others have accounted for a total payout reduction of less than 15 cents--- a measly 1.7%. Why is this amount of little consequence? Two reasons really.

First of all, a properly asset-allocated income portfolio does not disburse all of the base income it receives, so there is income available to reinvest in more shares of income producing securities. This process assures a growing cash flow to calm your fear of rising prices. The other reason is a bit more hypothetical. The Fed has lowered rates significantly, a process that normally produces higher prices for income securities. Eventually, those lower interest rates (even if global pressures convince politicians to take back some of the reductions) should produce higher prices (i.e., profit taking opportunities) in these securities.

Admittedly, even if your asset allocation has been fine tuned for years, lower portfolio market values in this area make stock market valuation shrinkage feel even worse. But the value of stable cash flow becomes painfully clear for investors who misguidedly depend on capital gains for their spending money. Properly asset allocated portfolios contain enough base income generators to pay the bills. The purpose of capital gains is to produce proportionately more base income generators.

The purpose of this email is simply to bring some needed sunlight into an investment environment that is far gloomier than I think it needs to be. If you want the details, you'll have to request them personally.


Day Trading the Forex Market Profitably

Being a forex day trader can be very lucrative. The currency market is by far the most liquid and volatile market in the world and with this come various opportunities. No matter what type of market you chose to day trade you must know the “personality” of the market you are trading. Every market has it’s own characteristics and it is important to know what they are before attempting to profit from it.
The forex market is no different. In this article we will go over very important general day trading principles/rules and then we will see what a day trader has to recognize when specifically day trading the forex market.

As the term implies, day traders are concerned with what happens in the market today.

Not tomorrow, not next week and not next month, but today.

The day trader’s job is to capture intraday price swings.

Depending on the system or trading method employed, this can mean capturing one intraday swing or various intraday swings. The general job of a day trader is (then we will go over the more specific job of the forex day trader):

To control risk
One of the most important jobs as a day trader is to control your risk exposure. Sure, controlling risk is a concept you must use in any type of trading, however in day trading you must look at this issue from a different angle. Since your job is to capture various price swings during the day naturally your profit objectives will be much smaller than that of a swing trader (who places a single trade aiming for a much larger profit objective). So, when placing several trades during the day it can be easy to “drift” away from your pre-determined stop loses. A common (very common actually!) day traders thought is “if I extend my stop loss just a bit I hope the market will turn around”! Hope is one of the trader’s biggest enemies. These little extensions of stop losses add up and suddenly without noticing you are losing more dollars per trade than planed making your risk/reward ratio turn against you.The day trader’s job is to capture intraday price swings. Depending on the system or trading method employed, this can mean capturing one intraday swing or various intraday swings. The general job of a day trader is (then we will go over the more specific job of the forex day trader):

To be disciplined
This principle is key for any type of trading but particularly for day trading. If I had to name one single aspect of a day trader that can make him or her a winner or a loser it is discipline. You can have a so-so system but still make money if you are disciplined. However, you can have the best trading system in the world but if you are not disciplined I guarantee you will not be a successful trader. So, what is all this discipline everyone talks about when discussing trading? Very simple, it’s respecting and strictly following your trading plan, your trading system, your money management rules, and your commitment to the business. Being disciplined with regard to each and everyone of these components is essential for your success.

It is so easy to deviate from your trading plan, the rules of your trading system or any of the above mentioned components, especially when day trading. Why? Two reasons. First, because the trader is trading very frequent and does not have time to cool down, think, and evaluate. Second, because reality is replaced by hope. Your trading system rules (reality) says: “get our of the trade” hope says “hang in there, maybe it will still be profitable”. Your money management rules (reality) say “risk only 2% of your account on this trade” hope says “since I lost on the last trade I will risk 4% on this next one so I can make up for the loser and also be profitable”. Your trading plan (reality) says “trade each day 4 hours, give yourself Wednesday or Thursday a vacation to rest” hope says “Since I am not doing very well now I don’t need this rest day, and I will also trade 7 hours per day to make up”. I know (not hope!) you now understand the point!

To focus on the appropriate time frame
As a day trader your primary concern is to catch intraday swings. Your trades start and finish the same day. Your world is the day you are trading in. You don’t care what will happen in the market tomorrow or the day after tomorrow. Your objective when trading is focusing on the appropriate time frame chart. My opinion is that day trading should be done on a 1, 5 or 10 minute bar chart. Remember, you are looking to capture several fast moves during the day and hence you must focus on the charts that best illustrate events as they happen in a short period of time. However, the fact that you are day trading on a 1,5 or 10 minute bar chart does not mean you can’t use a larger time frame chart for the purpose of analysis. This however, is very subjective and depends very much on the traders strategies and methods of trading. As an example, many day traders would look at one hour bar charts in order to have a view of how the market has been behaving in the last week. Is it moving sideways (and so maybe I should only place trades between support and resistance areas)? Is it trending (and so maybe I should only be looking at placing trades in the direction of the higher time frame trend)? Are there any major support and/or resistance levels I should be aware of (areas where I should refrain from placing trades since it is uncertain how the market will react when reaching them)? Did the market brake out of a congestion area?

Again, it is very subjective. Some day traders believe that with proper larger time frame analysis they can select better day trades. My personal opinion is that the more you analyze the more conflicts you will have and the more uncertainties will appear (especially if you are new to trading). I like making things simple and I found it very useful when trading (proof of this is that all of the trading systems I use are 100% mechanical). Don’t get me wrong, this is not to say that larger time frames should not be used at all for analysis purposes. But, try to keep it simple and if you see that looking at larger time frame charts interferes with your correct decision process when placing day trades then simply stop.

To trade volatile and liquid markets
Since your job as a day trader is to capture intraday swings it is crucial that the market you are trading has enough movement to allow you to do this. It is also important that the market you are trading has enough liquidity so that order fills do not suffer from excessive slippage. You have to select a market that it’s volatility is permanent and not a temporary occurrence. Since you are basing your trading method on catching intraday price swings you have to know that you are trading in the right place. As a day trader volatility is your allay and you have to know that you can count on it every single day (or at least 90% of the days). Liquid markets will provide you with good order fills. As a day trader this is very important since you are aiming at smaller profit objectives and hence larger slippage will eat away more of your profits. When trading several times a day this adds up and can be the difference between success and failure.

As a forex day trader you have to apply all the above rules and principles plus other criteria that are unique to the forexmarket.

Time of day trading
The forex market is a 24 hour market. Never stops except on weekends. Within this 24 hour period different currencies behave in different manners. As a day trader it is very important to know the “personality” of the currency you are trading. For example, the GBP/USD is more volatile in early to mid European session than any other liquid pair. For a day trader trading in these hours it would be wise to take advantage of the price swings the GBP/USD pair offers instead of trading some other currency pair that constantly shows no movement. The USD/CAD pair is “silent” in the early to mid European session but starts to have more price movement toward the start of the US session. Every time Non Farm Payroll is released most if not all currency pair have a very small price range up to release time. As a day trader it wouldn’t be wise to trade during these pre-announcement hours with strategies that are based on breakouts. It would probably be smarter to use strategies that are based on range support and resistance.

Spread and liquidity
Forex brokers don’t charge you a commission for every trade you make (at least most forex brokers). Instead, they make their profit on the bid/ask spread which is measured in pips. As a forex day trader you are aiming at capturing small price swings sometimes several time per day. Also, your profit objectives are obviously much smaller than the swing trader’s profit objectives. All this means one thing: every pip counts. You cannot afford to trade currency pairs with large spreads, if you do your profit will get eaten up to a point where you will not be trading with an adequate risk/reward ratio. Forex day trading must be done with liquid pairs. Most forex brokers will provide you with a very narrow spread for the most liquid currency pairs. As an example, many brokers are now offering a 2 pip spread for EUR/USD and USD/JPY and a 3 pip spread for USD/CHF and GBP/USD. These are the most liquid pairs and the ones a day trader should focus on.

As a day trader volatility is you friend, a friend you cannot afford to trade without. In it’s basic definition, volatility is simply the amount of price change with relation to time. Volatile currency pairs have various price swings (price changes) during a small period of time (one day). These price swings are what a day trader lives on. In the forex market volatility many times comes hand in hand with liquidity. The most liquid pairs are the ones that are the most volatile. The big 4: EUR/USD, GBP/USD, USD/JPY and USD/CHF are the most liquid pairs that provide the best volatility and hence opportunity for the forex day trader. Within these four pairs, the GBP/USD is the most volatile. Although it’s not the most liquid (the EUR/USD is), but it’s the most volatility. This pair, traded with the right broker (one that provides a 3 pip spread) can present many profitable opportunities for the astute day trader.

Specific news announcements
Currency rates are affected by rumors, news, economic indicators and government reports. As a day trader you must always be aware of what economic reports are scheduled on the day you are trading and at what time. Why?
Simply because many of these reports can have a strong momentary impact on the market once they hit the news wires.

This impact can be of 10 pips or 100 pips depending on the report and it’s difference from the market consensus. The most important and impacting economic indicators and government reports are issued by the US government.

They affect every USD/X or X/USD currency pair.

Again, always know what are the release times and the importance of the economic report. For example, suppose you are in a EUR/USD trade at 8:25 a.m. You know that an economic report is scheduled for release at 8:30 a.m.

You might consider either exiting the trade before the release (in order to avoid unnecessary speculation as to what impact the report will have on the market) or entering your profit objective and stop loss into your deal station (for risk exposure reasons). In conclusion, the forex day trader has to be prepared not only with the basic day trading rules, skills and principles. His job is to incorporate into his trading the characteristics and uniqueness of the forex market. Remember, every currency pair might present different opportunities and it is your job to always focus on the ones that best fit the purpose and objectives of day trading. I hope to have contributed to your forex trading education and I thank you for taking the time to read this article.

By Avi Frister


You and Forex broker

The forex broker is required to become the participant of the world largest market - the forex market. The forex broker can make suppositions of any currency purchase or selling which is not common for stock brokers. Some kinds of technical analysis as well as the tips are sometimes offered by forex brokers to their clients to ameliorate the trading income of the latter.

The broker of the forex market is generally a banking structure able to buy considerable masses of a currency. Banks used to be the only institutions that had a possibility to be forex traders whereas it's easy for any trader to have round-the-clock trade at the market being subscribed with a broker.

The structures like banks, also called the brick and mortar institutions, have fewer opportunities nowadays to give their decisions to individual forex traders who have direct access to the market and latest news by trading from home.

Your needs may be the criteria for choosing the forex broker. There are lots of online forex brokers or houses that offer in-depth research, various demo programs for the newcomers. Other forex brokers, targeted at experienced traders, offer fewer help supposing that you have some skills and knowledge how any particular situation may do good. Before you start dealing with any online broker it is strongly recommended to find out everything about him or her and sometimes to try a demo.

The best forex brokers are characterized by their deep awareness of the techniques of money management. Trading signals understanding, possibility to analyze any market conditions rapid changes, and various market factors comprehension, such as interest rates are the criterion of this characteristic. Traders provided with such information carry out their trades consistently using these time-tested methods.

The positions taken by brokers are intelligent and let them gain their clients' profits.

Statistical tools are widely used by FX (Forex) brokers for trends analyses. FX brokers find the best time to act at the market relying on approximately 26 technical indicators. The principals of dynamic forex trading are carried out by forex brokers by analyzing complicated statistics and charts. FX brokers forecast possible market movements through these indicators. The traders use this ability of brokers to find the correct statistical trends for gaining the profit for the investors.

The most experienced forex brokers are very competent risk managers. The asset market model, which is one of the latest theories, considers currencies to be the asset prices that are dealt with in the financial market. Stock market averages give the basis for Dow Theory. Forex brokers must decide on the trends and market opportunities relying on the experience despite the validity of any theory. The qualities characterizing top FX brokers are: objective, knowledgeable, disciplined, and ethical.

The websites of governmental entities and brokerage firms give the information of such traders. The integrity of traders and firms that propose services to public can be found out due to the investigations. At this very moment you can choose a forex broker but it is recommended for you to get some knowledge of the market before you do it. Being a knowledgeable investor while choosing the broker may do you only good. As far as Forex brokers deal with the Forex market day by bay, you'll come out an emphatic person if you speak to them at their professional language. This gives a chance that you'll be considered separately. Suppose all interaction being just an affair of humans.

The courtesy is valuable among the people involved in investment despite its apparent impersonality. Your financial welfare may depend on the relationship with the broker. You'll find a lot of stories concerning financial success surfing on the web, but we do not advice you to believe this miraculous success. Before you take any decision consider all alternatives objectively and well-thought-out. The honesty in your plans will let you gain a respect form Forex companies. The more straightforward the communication is, the more effective is the strategizing. You shouldn't figure on the stability in such sphere as markets.

Your efforts of the process learning will not be certainly repaid in a day whether the activity undertaken systematically and for a long time can give you a considerable result. So start the game today rising the cost of tour time. There are great opportunities for the European Forex brokers existing nowadays. The European philosophical views have changed due to the combination of international events that affects the strategies taken by the European Forex brokers. The recommendations will help you to decide on which broker to choose.

One of easy ways to do this is to ask for other Forex traders' advice. Special online forums give an access to such expert opinions constantly. Resources triangulation is another way to be aware of the process. It can be done by contacting various firms concerning your certain portfolio and find out their most threatening competitor. Counting the most threatening competitors will get you to triangulating the results. This list is the source to choose the company to be more successful. Moreover your portfolio has a superior agency over it, you shouldn't forget about it.

Forex Risk

There are always risks to FOREX trading, even if your broker is quite reputable. All investments and transactions meet the whole set of risks because of sudden rate changes, changing market conditions and different political events.

Many factors are the reason for these risks. Just a few examples are: the main company's goals; the scheme how these goals are reached; the successful company's administration that guarantees its long functioning and at last ability to oppose any force-majeure with company's own resources.

Other constituents such as - the company's "age", the building in the center of the town, spacious impressive office and the polite staff - are not so important for success. Forex market started functioning quite lately, approximately 20 years ago and since then stands independently from other markets, first of all because it is out of the exchange. Banks made up its primary participants. As communication facilities and automation were developing banks started trading "directly" without any intermediaries such as stock exchanges. Many "classical" financiers criticize and disregard Forex as there's not a single chance of limiting and regulating it legislatively inside one state - from the very start this market became a global phenomenon. However many European and North American banks withdraw their main income in particular from speculative operations on Forex market whereas the number of the staff working in other market sectors is permanently decreasing.

Forex market's broker doesn't need any licenses and certificates for his activity as he is considered to be just a legal person. That's why Forex market on the whole also doesn't run into any "legislative limits" inside countries, and in many states is equated to the games' organization.

So it's important to mention that there are no regulations for Forex market, even despite of great number of complicated problems and risks - such as the risk connected with market prices' changes. Confidence and conscientiousness of carrying out the operations, a lucidity and marketing of Forex brokers are only some of the problems, managed of Forex risks. However, first of all, it's important to know, that broker companies can't operate in a single stock exchange in compliance with all problems and risks, in contrast to quite adaptable exchange markets.

It's absolutely necessary for any FOREX trader to know at least the main rules of technical analysis and reading financial charts, to have experience of studying chart changes and indicators and interpreting of these very charts. This is a certain way of decreasing risk and financial exposure.

However each FOREX transaction should be transmitted using all existing tools specially designed to reduce loss as even the most professional traders can't exactly predict market's future behavior. Many ways to minimize risks when placing an entry order were elaborated. Among them are different types of stop-loss orders. A stop-loss order is a special code of rules explaining how one can leave his position if the currency price amounts to a certain point. A stop loss order is placed below current market price if a person takes the so-called long position and expects the price to go up. On the contrary, stop-loss order is placed above current market price if a person takes the so-called short position and expects the price to go down.

As an example, if you take a short position on USD/CDN it means you expect the US dollar to fall against the Canadian dollar. The quote is USD/CDN 1.2138/43 - you can sell US$1 for 1.2138 CDN dollars or sell 1.2143 CDN dollars for US$1.

You place an order in the following way:
Sell USD: 1 standard lot USD/CDN @ 1.2138 = $121,380 CDN
Pip Value: 1 pip = $10
Stop-Loss: 1.2148
Margin: $1,000 (1%)

You are selling US$100,000 and buying CDN$121,380. Your stop loss order will be executed if the dollar goes above 1.2148, in which case you will lose $100.

However, USD/CDN falls to 1.2118/23. You can now sell $1 US for 1.2118 CDN or sell 1.2123 CDN for $1 US.

Still no existing institution is able to control this market for long on account of the huge volume of FOREX. Whatever you do in the end market forces will still be stronger, making FOREX one of the most open and fair investment opportunities available.

Usually one comes across prices of foreign exchange by FOREX quotes in pairs of currencies where the first currency is the 'base' and the second is the 'quote' currency, for instance: USD/EUR = 0.8419. Here we find out that 1 US dollar costs 0.8419 Euros. Why? The foregoing currency pair "transfers" US dollars (USD) into European Euros (EUR). The base currency always stands in the first place and the second, quote, currency shows the price for one unit of the base currency.

And on the contrary, the pair EUR/USD = 1.1882 clearly indicates that 1 Euro costs 1.1882 US dollars today.

With the help of these quotes it's quite easy to follow the changes in the financial market. If the base currency is becoming stronger, the price of the quote currency rises and this fact indicates that one unit of the base currency will buy more of the quote currency. However, if the base currency loses scores, the quote currency immediately goes down.

Usually one counts FOREX quotes as "demand and supply" - in the so-called "bid" and "ask" prices. The amount of money demanded for the base currency - while selling the quote currency - is called "bid" and the price expected for the base currency - while buying the quote currency - is "ask" price.

How to define in the cross-currency charts which currency - the base or the quote - is on the top and which on the side? If that's the case, the broker should know at least one pair of currencies and which one of the pair values more.

Stop and limit orders will definitely help yon to minimize your Forex risks.

Forex is a risky Business

Of course, every investment is risky but the risks of loss in trading off-exchange Forex contracts are even bigger. That's why once you decide to be the player in this market, you'd better realize the risks connected with this product for make suspended decisions before investing.

In Forex you are operating big sums of money, and it's always possible that a trade will turn against you. The Forex trader should know the tools of advantageous and careful trading and minimizing losses. It's possible to minimize the risk but no one can guarantee eliminating it. Off-exchange foreign currency trading is a very risky business and may not be appropriate for all market players. The only funds that can be used for speculating in foreign currency trading, or any kind of highly speculative investments, are funds that represent risk capital - for example, funds you can afford to risk without worsening your financial situation. There are other reasons why Forex trading may or may not be a suitable investment. We describe them below.

The fraud and Scams in Forex market

A few years ago Forex scams were very usual but since then this business has cleaned up. However it's wiser to be cautious and to check broker's background before signing up any documents with him or her. Reliable Forex brokers work with big financial institutions such as banks or insurance enterprises and are always registered with official government agencies. In the US, brokers should be registered with the Commodities Futures Trading Commission or should be a member of the National Futures Association. You can also check their background in your local Consumer Protection Bureau and the Better Business Bureau.

There's risk of losing your whole investment!

You will be asked to deposit an amount of money, called the "security deposit" or "margin", with your Forex dealer in order to buy or sell an off-exchange Forex contract. A small amount of money can let you hold a Forex position many times bigger than the value of your account. This is called "gearing" or "leverage". The smaller the deposits related to the underlying value of the contract are, the greater the leverage turns out to be. If the price moves in an unpreferrable direction, high leverage can bring you large losses compared to your first deposit. That's how a small move against your position may become the reason for a large loss, and even the loss of your entire deposit. If it's pointed in the contract with your dealer, you may also be required to pay extra-losses.

The market sometimes moves against you!

It's impossible to foresee with a 100%-gurantee how exchange rates will move, and the Forex market is quite unsteady. Changes in the foreign exchange rate between the time you place the trade and the time you close it out influences the price of your Forex contract and the future profit and losses related to it.

There is no main marketplace!

The Forex dealer determines the execution price, so you are relying on the dealer's honesty for a fair price. As unlike adjusted futures exchanges, in the retail off-exchange Forex market there is no main marketplace with lo ts of buyers and sellers.

You are relying on the dealer's reputation credit reliability

There's no guarantee for retail off-exchange Forex trades because of a clearing organization. Besides funds deposited for trading Forex contracts are not insured and never get a priority in case of bankruptcy. Even customer funds deposited by a dealer in an FDIC-insured bank account are not protected if the dealer faces bankrupt.

There's a risk of the trading system break down!

Sometimes a part of the system fails if you are using an Internet-based or any electronic system for executing trades. In case if the system fails, it can happen that for some time one is not may able to enter new orders, execute running orders, or alter or cancel orders that were entered before. The result of a system failure may be a loss of orders or order priority.

You can become a fraud victim!

Keep away from investment schemes that promise big profit with little risk. To defend your capital from fraud you should carefully examine the investment offer and go on monitoring any investment you make.

Risks Types

There are risks to Forex trading even if you work with a reliable broker. Transactions are unexpected and are up to unsteady markets and political events. Interest Rate Risk is based on differences between the interest rates in the two countries represented by the currency pair in a Forex quote. Credit Risk is a possibility that one party in a Forex transaction may not honor their indebtness when the deal is closed. This can occur if a bank or financial institution goes bankrupt.

Country Risk is connected with governments that take part in foreign exchange markets by limiting the currency flow. The country risks more risk making transactions with "rare" foreign currencies than with currencies of big countries that let the free trading of their currency.

Exchange Rate Risk depends on the changes in prices of the currency during a trading period. Prices can go down quickly if stop loss orders are not used. There are several ways of minimizing risks. Each dealer should have a trading scheme. For example, one should know when to enter and exit the market, what kind of fluctuations to expect. The main rule which every trader should sticks to "Don't use money that you can't afford to lose". The key to limiting risk is education which is necessary for developing successful strategies.

Every Forex trader should know at least the main things about technical analysis and reading financial charts. He should also know chart movements and indicators and understand the schemes of charts' interpretation.

Stop-Loss Orders

Even the most experienced traders can't foresee with absolute certainty how the market is going to change. Therefore one should use these tools to limit losses during every Forex transaction.

The simplest way of limiting risk is to use stop-loss orders. A stop-loss order consists of instructions how to exit your position if the price comes to a definite point. When one takes a long position and expects the price to go up he or she puts a stop loss order below the current market price. When one takes a short position and expects the price to go down he or she puts a stop loss order over the running market price. Stop loss orders are often used together with limit orders to automatize Forex trading.


Forex Beginner

1: Online Currency Trading requires Patience
When the going gets tough, the tough get going. This adage often brings back the memories of my past days when I was trading initially in the currency exchange market. Indeed, there's nothing more hurtful than losing your invested money in the FX market. But, online currency trading is like life where you're got to learn from your wrong moves and keep moving on.

2: Forex - What is it?
The international currency market Forex is a special kind of the world financial market. Trader’s purpose on the Forex to get profit as the result of foreign currencies purchase and sale. The exchange rates of all currencies being in the market turnover are permanently changing under the action of the demand and supply alteration.

3: Short data about the origin and development of the currency exchange market
Currency trading has a long history and can be traced back to the ancient Middle East and Middle Ages when foreign exchange started to take shape after the international merchant bankers devised bills of exchange, which were transferable third-party payments that allowed flexibility and growth in foreign exchange dealings.

4: Risks by the foreign exchange on Forex
The Forex is essentially risk-bearing. By the evaluation of the grade of a possible risk accounted should be the following kinds of it: exchange rate risk, interest rate risk, and credit risk, country risk.

5: Charts for the technical analysis
Kinds of prices and time units. Charts for the technical analysis are being constructed in coordinates price (the vertical axis)  time (the horizontal axis). The following kinds of currency prices represented on charts are being distinguished on Forex:

6: Forex Glossary
Here are some of the most common terms used in FOREX trading. Ask Price ¨C Sometimes called the Offer Price, this is the market price for traders to buy currencies.

7: Forex Trading Education - The London Open Checklist
The start of the London trading session marks a period of increased volatility in the Forex market and a period of more opportunities to trade. As part of your Forex trading education, run through this checklist to see if you can identify good trade setups regularly at this time of day.

Learn Forex Trading

Gone are the days, when people with small bundles of notes surely would draw your attention at the airports/ international bus terminus/ important office areas, who are ready to exchange your currency to your desired foreign exchange at a commission. The literacy, the spread, the entrants of various professionals, automated software, revolutionary online forex trading companies have been able to put a control over the entire unorganized sector to pave the way for complete professionalism and to offer a much more convenient and systematic way of Forex trading.

At the inception phase, people, mainly the large corporations used to perform their Forex trading through various banks or major financial institutes, who used to operate at the international level. The overwhelming popularity of Forex of today's modern world due to the liberalization and global economic polices is empowered by the telecom boom, the immense reach of Internet and the unimaginable advantage of advanced technology. The instantaneous effect and up-to-date news provided by the Online Forex Software exchange trading platform in the regime of online Forex, have given you the classical opportunity of taking decisions and immediate implementation. Online Forex trading has been standardized over the years after the initial teething problems, and today's Forex participants get an almost secured access through various online Forex trading companies, which is free from all encumbrances. The technology, its application in case of online Forex has been drastically improved with the increasing awareness of people at large. The success lies in bringing a wider gamut of people into Forex trading platform and in turn the entire Forex Software exchange trading platform has become commercially viable.

If we want to look into the current Foreign Exchange market, we can find a reasonable number of stakeholders beyond the predominated traditional Multi National Companies or MNCs, banks, brokers and the final impetus has given by the wide acceptance of a large number of commoners, who get engaged in Forex trading due to various reasons including even as a mere hobby. The latest encryption methodologies and plenty of guide and trend analysis will make you secured and comfortable even if you are a first timer dabbling into online Forex trading.

The concept of margin trading, implying the traded on margin, saves you for a huge amount of deposit in the Forex. The margin deposit varies between banks and it is always in percentile terms of the original amount, which the bank allows you to play. A simple example will show you the actual potential. Suppose a bank has kept the margin deposit as 2%, which implies that you need to deposit only $20000 USD to trade two million dollars and also you may gear up your profit by 200%. As the coin has got two sides, the 2% margin deposit in Forex may also take you to the road of losses by 200%. The rule remains same, when the offline Forex trading changes it face to online Forex trading.

As every investment carries the potential risk of both profit and loss, the luck of an aggressive online Forex trader may sway anywhere between 2 to 25% on a daily basis on an average. Just for the knowledge base, the beginner in Forex trading must be aware of that the interest rates on your deposit varies greatly depending upon the currencies and the prevailing practice is to play in multiple currencies, popularly known as Base currency and variable currency in the world of Forex both in traditional platform and in online Forex platform. Your awareness level, your analytic power, your intuition are the key driven forces to transform you to an informed Forex trader and to optimize your Return on Investment (ROI) in the most prospective financial market of today's economic world.


Forex Broker Guide


The following is a list of questions you may like to consider before opening an account. You can use this checklist to narrow down your selection of companies that fit your requirements. You may also wish to refer to the forex broker ratings page on this site to read about traders unique experiences with particular brokers.

The following links will also give you some background information on U.S. FCMs (Futures Commission Merchants).

1. Word of Mouth

  • What do other traders say about the broker?
  • What is their customer service/dealing desk like?

2. Customer Protection

  • Is the broker regulated?
  • What regulatory organisation are they registered with and what protections does this afford you?
  • Are client funds insured against fraud?
  • Are client funds insured against bankruptcy?

3. Execution

  • What business model do they operate? i.e. Are they a Market Maker [?], ECN [?] or no-dealing desk broker [?]?
  • If they are an no-dealing desk broker or ECN, do the counterparties to your trade see your resting orders? i.e. Stop-losses and limit orders
  • How fast is their order execution?
  • Are orders manually or automatically executed? [?]
  • What is the maximum trade size before you have to request a quote?
  • Are all clients trades offset?

4. Spread [?]

  • How tight is the spread?
  • Is it fixed or variable?

5. Slippage [?]

  • How much slippage can be expected in normal and fast moving markets?

6. Margin [?]

  • What is the margin requirement? e.g. 0.25% (max 400:1 leverage [?]), 0.5% (max 200:1 leverage), 1% (max 100:1 leverage), 2% (max 50:1 leverage), etc.
  • Does it change for different currency pairs or days of the week?
  • Will the broker increase it in volatile market conditions?
  • At what point will the broker issue a margin call?
  • Is it the same for standard and mini accounts? [?]

7. Commissions

  • Do they charge commissions? (Most market makers commissions are built into the spread, whereas ECN's will charge a small fee)

8. Rollover Policy [?]

  • Is there a minimum margin requirement in order to earn rollover interest?
  • What are the swap rates for going long or short in a particular currency pair?
  • Are there any other requirements or conditions for earning rollover interest?

9. Trading Platform

  • How reliable is it during fast moving markets and news announcements?
  • How many different currency pairs can you trade?
  • Do they offer an Application Programming Interface (API) to allow you to automate your trading system?
  • Does it offer any other special features? (e.g. One click dealing, trading from the chart, trailing stops, mobile trading etc.)

10. Trading Account

  • What is the minimum balance required to open an account?
  • What is the minimum trade size? e.g. 1 unit, 1,000 units, 10,000 units or 100,000 units?
  • Can you adjust the standard lot size traded? [?]
  • Can you earn interest on the unused margin balance in your account?

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Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Due to the high degree of leverage used in forex trading, investors should only use risk capital because there is always the risk of substantial loss. Forex trading may not be appropriate for all investors. Account access, trade executions and system response may be adversely affected by market conditions, quote delays, system performance and other factors.


What Is Forex Trading?

Forex trading is nothing more than direct access trading of different types of foreign currencies. In the past, foreign exchange trading was mostly limited to large banks and institutional traders. However recent technological advancements have made it so that small traders can also take advantage of the many benefits of forex trading just by using the various online trading platforms to trade.

The currencies of the world are on a floating exchange rate, and they are always traded in pairs. About 85 percent of all daily transactions involve trading of the major currencies. Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar (EUR/USD), US dollar against Japanese yen (USD/JPY), British pound against US dollar (GBP/USD) and US dollar against Swiss franc (USD/CHF).

If you think one currency will appreciate against another, you may exchange that second currency for the first one and be able to "stay" in it. If everything goes as you plan it, eventually you may be able to make the opposite deal in that you may exchange this first currency back for that other and then collect profits from it. As a note bear in mind that no dividends are paid on currencies.

Transactions on the FOREX market are performed by dealers at major banks or FOREX brokerage companies. FOREX is a necessary part of the worldwide market, so when you are sleeping in the comfort of your bed, the dealers in Europe are trading currencies with their Japanese counterparts. Therefore, the FOREX market is active 24 hours a day and dealers at major institutions are working 24/7 in three different shifts. Clients may place take-profit and stop-loss orders with brokers for overnight execution. Price movements on the FOREX market are very smooth and without the gaps that you face almost every morning on the stock market. The daily turnover on the FOREX market is somewhere around $1.2 trillion, so a new investor can enter and exit positions without any problems.

The fact is that the FOREX market never stops; even on September 11, 2001 you could still get your hands on two-side quotes on currencies. The currency market is the largest and oldest financial market in the world. It is also called the foreign exchange market or FX market for short. It is the biggest and most liquid market in the world, and it is traded mostly through the 24 hour-a-day inter-bank currency market.

When you compare them, you will see that the currency futures market is only one per cent as big. Unlike the futures and stock markets, trading currencies is not centered on an exchange. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S. it is truly a full circle trading game. In the past, the forex inter-bank market was not available to small speculators because of the large minimum transaction sizes and strict financial requirements. Banks, major currency dealers and sometimes even very large speculator were the principal dealers. Only they were able to take advantage of the currency market's fantastic liquidity and strong trending nature of many of the world's primary currency exchange rates.

Today, foreign exchange market brokers are able to break down the larger sized inter-bank units, and offer small traders like you and me the opportunity to buy or sell any number of these smaller units. These brokers give any size trader, including individual speculators or smaller companies, the option to trade at the same rates and price movements as the big players who once dominated the market.

by David Morrison


Introduction To Forex

The Foreign Exchange Market — better known as Forex — is a world wide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $1.5 trillion (US dollars). In comparison, the United States Treasury Bond market averages $300 billion a day and American stock markets exchange about $100 billion a day.

The Foreign Exchange Market was established in 1971 with the abolishment of fixed currency exchanges. Currencies became valued at 'floating' rates determined by supply and demand. The Forex grew steadily throughout the 1970's, but with the technological advances of the 80's Forex grew from trading levels of $70 billion a day to the current level of $1.5 trillion.

The Forex is made up of about 5000 trading institutions such as international banks, central government banks (such as the US Federal Reserve), and commercial companies and brokers for all types of foreign currency exchange. There is no centralized location of Forex — major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt, and all trading is by telephone or over the Internet. Businesses use the market to buy and sell products in other countries, but most of the activity on the Forex is from currency traders who use it to generate profits from small movements in the market.

Even though there are many huge players in Forex, it is accessible to the small investor thanks to recent changes in the regulations. Previously, there was a minimum transaction size and traders were required to meet strict financial requirements. With the advent of Internet trading, regulations have been changed to allow large interbank units to be broken down into smaller lots. Each lot is worth about $100,000 and is accessible to the individual investor through 'leverage' — loans extended for trading. Typically, lots can be controlled with a leverage of 100:1 meaning that US$1,000 will allow you to control a $100,000 currency exchange.

There are many advantages to trading in Forex.

— Liquidity — Because of the size of the Foreign Exchange Market, investments are extremely liquid. International banks are continuously providing bid and ask offers and the high number of transactions each day means there is always a buyer or a seller for any currency.

— Accessibility — The market is open 24 hours a day, 5 days a week. The market opens Monday morning Australian time and closes Friday afternoon New York time. Trades can be done on the Internet from your home or office.

— Open Market — Currency fluctuations are usually caused by changes in national economies. News about these changes is accessible to everyone at the same time — there can be no 'insider trading' in Forex.

— No commission — Brokers earn money by setting a 'spread' — the difference between what a currency can be bought at and what it can be sold at.

How does it work?

Currencies are always traded in pairs — the US dollar against the Japanese yen, or the English pound against the euro. Every transaction involves selling one currency and buying another, so if an investor believes the euro will gain against the dollar, he will sell dollars and buy euros.

The potential for profit exists because there is always movement between currencies. Even small changes can result in substantial profits because of the large amount of money involved in each transaction. At the same time, it can be a relatively safe market for the individual investor. There are safeguards built in to protect both the broker and the investor and a number of software tools exist to minimize loss.

by Norman Fleming


How To Get Started In FOREX Trading

The foreign exchange market (Forex) offers many advantages to investors. But you need to know where to begin.

This short guide will give you the Forex basics, so you can quickly start participating in this fast growing market.

In the past, foreign exchange trading was limited to large players such as national banks and multi-national corporations. In the 1980's the rules were changed to allow smaller investors to participate using margin accounts. Margin accounts are the reason why Forex trading has become so popular. With a 100:1 margin account, you can control $100,000 with a $1,000 investment.

A Learning Curve

Forex is not simple, though, so you'll need some knowledge to make wise investment decisions. Although it is relatively easy to start trading on the Forex, there are risks involved.

Your first move as a beginner should be to find out as much as possible about the market before risking a dime.

Find A Broker

Forex traders usually require a broker to handle transactions. Most brokers are reputable and are associated with large financial institutions such as banks. A reputable broker will be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.

Open an Account

Opening a Forex account is as simple as filling out a form and providing the necessary identification. The form includes a margin agreement which states that the broker may interfere with any trade deemed to be too risky. This is to protect the interests of the broker, since most trades are done using the broker's money.

Once your account has been established, you can fund it and begin trading.

Many brokers offer a variety of accounts to suit the needs of individual investors. Mini accounts allow you to get involved in Forex trading for as little as $250. Standard accounts may have a minimum deposit of $1000 to $2500, depending on the broker. The amount of leverage (how much borrowed money you can use) varies with account type. High leverage accounts give you more money to trade for a given investment.

Trades are commission-free, meaning that you can make many trades in one day without worrying about incurring high brokerage fees. Brokers make their money on the 'spread': the difference between bid and ask prices.

Paper Trading

Beginning traders are strongly advised get accustomed to Forex by doing "paper trades" for a period of time. Paper trades are practice transactions that don't involve real capital. They allow you to see how the system works while learning how to use the various software tools provided by most Forex brokers.

Most online brokers have demo accounts that allow you to make free paper trades for up to 30 days. Every new Forex investor should use these demo accounts at least until they are consistently showing profits.

Forex Software

Each broker has its own set of software tools for making transactions, but there are a few tools that are common to all Forex brokers. Real-time quotes, news feeds, technical analyses and charts, and profit-and-loss analyses are some of the features you can expect to see on most online brokers' web sites.

Almost every broker operates on the Internet. To access a broker's online services you'll need a reasonably modern computer, a fast Internet connection, and an up-to-date operating system. Once your account is set up, you can access it from any computer just by entering your account name and password. If for some reason you are unable get to a computer, most brokers will allow you to make trades over the phone.

There are lots of ways to make money. Forex trading is just one more potential stream of income -- if you are prepared to learn and practice.

by Ron King


Interested in FOREX Trading?

The Foreign Exchange Market (Forex) has no central exchange location yet it is the largest financial market in the world. It is over 3x's the size of the stock and futures markets combined and operates via an electronic network of a banks, corporations and investors.

Foreign exchange consists of a simultaneous buying of one currency and selling of another. Currency is traded in pairs, in other words, one currency is traded for another. The major currencies are:

USD — United States Dollar
EUR — Euro members Euro
JPY — Japan Yen
GBP — Great Britian pound
CHF — Switzerland franc
CAD — Canadian dollar
AUD — Australia dollar

There are 2 types of investors involved in the Forex market.The first type of investor is the hedger. The hedger is involved in International trades and utilizes Forex trading to protect their interest in a transaction from adverse currency fluctuations. The 2nd type of investor is the speculator who invests in currency solely for profit.

Currency prices fluctuate due to a variety of economic and political factors. The major factors are:

Interest rates
International trade
Political stability

There are many reasons investors take a great interest in FX trading Some of the major reasons are:

No fees
No middlemen
No fixed trade sizes
Low transaction cost
High liquidity
Instant transactions
Low margin / High leverage
24 hour market
Online access via online trading platforms
Always good opportunities to trade, unlike the stock market the market is never bullish or bearish.
No one entity can control the market
No insider trading can occur

To begin trading in the Forex market, an investor only needs a computer, a high-speed internet connection and an online trading currency account. A mini account can be opened for as little as $100.

These are some of the reasons why Forex trading has become quite popular in recent years. For more information on getting started in FX Trading visit http://www.fx-trading-guide.com/

by Jill Kane

What Is Forex Trading?

Forex trading is nothing more than direct access trading of different types of foreign currencies. In the past, foreign exchange trading was mostly limited to large banks and institutional traders. However recent technological advancements have made it so that small traders can also take advantage of the many benefits of forex trading just by using the various online trading platforms to trade.

The currencies of the world are on a floating exchange rate, and they are always traded in pairs. About 85 percent of all daily transactions involve trading of the major currencies. Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar (EUR/USD), US dollar against Japanese yen (USD/JPY), British pound against US dollar (GBP/USD) and US dollar against Swiss franc (USD/CHF).

If you think one currency will appreciate against another, you may exchange that second currency for the first one and be able to "stay" in it. If everything goes as you plan it, eventually you may be able to make the opposite deal in that you may exchange this first currency back for that other and then collect profits from it. As a note bear in mind that no dividends are paid on currencies.

Transactions on the FOREX market are performed by dealers at major banks or FOREX brokerage companies. FOREX is a necessary part of the worldwide market, so when you are sleeping in the comfort of your bed, the dealers in Europe are trading currencies with their Japanese counterparts. Therefore, the FOREX market is active 24 hours a day and dealers at major institutions are working 24/7 in three different shifts. Clients may place take-profit and stop-loss orders with brokers for overnight execution. Price movements on the FOREX market are very smooth and without the gaps that you face almost every morning on the stock market. The daily turnover on the FOREX market is somewhere around $1.2 trillion, so a new investor can enter and exit positions without any problems.

The fact is that the FOREX market never stops; even on September 11, 2001 you could still get your hands on two-side quotes on currencies. The currency market is the largest and oldest financial market in the world. It is also called the foreign exchange market or FX market for short. It is the biggest and most liquid market in the world, and it is traded mostly through the 24 hour-a-day inter-bank currency market.

When you compare them, you will see that the currency futures market is only one per cent as big. Unlike the futures and stock markets, trading currencies is not centered on an exchange. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S. it is truly a full circle trading game. In the past, the forex inter-bank market was not available to small speculators because of the large minimum transaction sizes and strict financial requirements. Banks, major currency dealers and sometimes even very large speculator were the principal dealers. Only they were able to take advantage of the currency market's fantastic liquidity and strong trending nature of many of the world's primary currency exchange rates.

Today, foreign exchange market brokers are able to break down the larger sized inter-bank units, and offer small traders like you and me the opportunity to buy or sell any number of these smaller units. These brokers give any size trader, including individual speculators or smaller companies, the option to trade at the same rates and price movements as the big players who once dominated the market.

by David Morrison


The Benefits of Trading The Forex Market

Historically, the FX market was available most to major banks, multinational corporations and other participants who traded in large transaction sizes and volumes. Small-scale traders including individuals like you and I, had little access to this market for such a long time. Now with the advent of the Internet and technology, FX trading is becoming an increasingly popular investment alternative for the general public.

The benefits of trading the currency market:

It is open 24-hours and it closes only on the weekends;

It is very liquid and efficient;

It is very volatile;

It has very low transaction costs;

You can use a high level of leverage (borrowed money) with ease; and

You can profit from a bull or a bear market.

Continuous, 24-Hour Trading

The currency exchange is a 24-hour market. You may decide to trade after you come home from work. Regardless of what time-frame you want to trade at whatever time of the day, there would be enough buyers and sellers to take the other side of your trade. This feature of the market gives you enough flexibility to manage your trading around your daily routine.

Liquidity And Efficiency

When there are a lot of buyers and a lot of sellers, you can expect to buy or sell at a price that is very close to the last market price. The currency market is the most liquid market in the world. Trading volume in the currency markets can be between 50 and 100 times larger than the New York Stock Exchange (Source: Oanda.)

When you are trading stocks, you may have experienced events where one piece of news accelerates or decelerates the price of the underlying stock you may have bought into. Perhaps a director has been kicked out by the shareholders of a company or the company has just released a new product and big investors are buying the shares of a particular company. Share prices can be drastically affected by the actions or inactions of one or a few individuals. So if you are relying on television reports and newspapers to get your news, most of the opportunities or warnings will have come too late for you to take advantage by the time you get them.

The value of currencies on the other hand is affected by so many factors and so many participants that the likelihood of any one individual or group of individuals drastically affecting the value of a currency is minute. Because of its sheer size, the currency market is hard to manipulate. The ability for people to engage in 'insider trading' is virtually eliminated. As an average trader, you are less disadvantaged. You are likely to be playing on relatively equal ground along with all the other traders and investors whom you are competing against.

Note about price gaps:

For those people who have already traded other markets, you probably know about price 'gaps'. 'Gaps' occur when prices 'jump' from one price level to another without having taken any incremental steps to get there. For example, you may be trading a share that closes at $10 at the end of today but due to some event that happens overnight; it opens tomorrow at $5 and continues to go downwards for the rest of the day.

Gaps bring about another degree of uncertainty that may meddle with a trader's strategy. Probably one of the most worrying aspects of this is when a trader uses stop-losses. In this case, if a trader puts a stop-loss at $7 because he no longer wants to be in a trade if the share price hits $7, his trade will remain open overnight and the trader wakes up tomorrow with a loss bigger than he may have been prepared for.

After looking at a couple of forex charts, you will realize that there are little price 'gaps' or none at all, especially on the longer-term charts like the 3-hour, 4-hour or the daily charts.


Trading opportunities exist when prices fluctuate. If you buy a share for $2 and it stays there, there is no opportunity to make a profit. The magnitude of level of this fluctuation and its frequency is referred to as volatility. As a trader, it is volatility that you profit from. Large volume transactions and high liquidity combined with fewer trading instruments generate greater intra-day volatility in the currency market that can be exploited by day-traders. The high volatility of the currency market indicates that a trader can potentially earn 5 times more money from currency trading than trading the most liquid shares.

Volatility is a measure of maximum return that a trader can generate with perfect foresight. Volatility for the most liquid stocks are between 60 to 100. Volatility for currency trading is 500. (Source: Oanda.)

In this respect, currencies make a better trading vehicle for day-traders than the equity markets.

Low Transaction Costs

A currency transaction typically incurs no commission or transaction fees. For a forex trader, the spread is the only cost he or she needs to cover in taking on a position. In addition, because of the currency market's efficiency, there is little or no 'slippage' costs.

'Slippage' is the cost involved when traders enter the market at a price worse than the level they wanted to get into. For example, a trader wants to buy a share at $2.00 but by the time, the order gets executed, his gets to buy the shares at $2.50. That fifty cents difference is his slippage cost. Slippage cost affects large-volume traders a lot. When they buy large quantities of a commodity, it oversupplies the market with buy orders. This applies a pressure for the price to go up. By the time they get to buy all the quantities they wanted, the average price they got their commodities would be higher than the price they intended to get them for. Conversely, when they sell large quantities of a commodity, they oversupply the market with sell orders. This applies a pressure for the price to go down. By the time they finish selling all their commodities, their average selling price is less than what they initially intended to sell them for.

Due to lower transaction costs, minimum slippage and strong intra-day volatility, individuals can trade frequently at small costs. As an approximate, you may only expect to have a spread of 0.03% of your position size. To give you an example, you can buy and sell 10,000 US Dollars and this will only incur a 3-point spread, equivalent to $3.


There are not a lot of banks or people who would lend you money so that you can use it to trade shares. And if there are, it would be very hard for you to convince them to invest in you and in your idea that a certain share is going to go up or down. Therefore, most of the time, if you have a $10,000 account, you can only really afford to buy $10,000 worth of stocks.

In currency trading however, because you use 'borrowed money', you can trade $10,000 of a currency and you only need anywhere between fifty (For a margin lending ratio of 200:1) to two hundred dollars ( For a margin lending ratio of 50:1) in your trading account. This makes it possible for an average trader with a small trading account, under $10,000 to be able to profit sufficiently from the movements of the currency exchange rates. This concept is explained further in The Part-Time Currency Trader.

Profit From A Bull And Bear Market

When you are trading shares, you can only profit when the price of a stock goes up. When you suspect that it is about to go down or that it is just going to be moving sideways, then the only thing you can do is sell your shares and stand aside. One of the frustrations of trading shares is that an individual cannot profit when prices are going down. In the currency market, it is easy for you to trade a currency downward so that you can profit when you think it is going to lose value. This is easy to do because currency trading simply involves buying one currency and selling another, there is no structural bias that makes it difficult to trade 'downwards'. This is why the currency market has been occasionally referred to as the eternal bull market.

This is an excerpt, modified from the book: The Part-Time Currency Trader.

by Marquez Comelab


Why Trade the FOREX?

My purpose for writing this article is to demonstrate to you the advantages of trading on the Forex market. However, there is one myth that I want to dispel before I go further. The myth is that there is a difference between trading and investing. To dispel that myth I quote from Al Thomas, President of Williamsburg Investment Company, who wrote "If It Doesn't Go Up, Don't Buy It". He said "Everyone who invests is a trader, only the time period is different." It is a lesson that I took seriously after taking a beating in the stock market in 2000.

So now, let's compare features of currency trading to those of stock and commodity trading.

Liquidity — The Forex market is the most liquid financial market in the world around 1.9 trillion dollars traded everyday. The commodities market trades around 440 billion dollars a day, and the US stock market trades around 200 billion dollars a day. This ensures better trade execution and prevents market manipulation. It also ensures easily executable trading.

Trading Times — The Forex market is open 24 hours a day (except weekends) which means that in the US it opens at 3:00 pm Sunday (EST) and closes Friday at 5:00 (EST), allowing active traders to choose the times they want to trade. Commodities trading hours are all over the board depending on which commodity you are trading. Including extended trading times US stocks can be traded from 8:30 am to 6:30 pm (ET) on weekdays.

Leverage — Depending on your Forex account size, your leverage may be 100:1, although there are Forex brokers that offer leverage of up to 400:1 (not that I would ever recommend that kind of leverage). Leverage in the stock market can be as high as 4:1, and in the commodities market, leverage varies with the commodity traded but it can be quite high. Because the commodity markets are not as liquid as the Forex market, its leverage is inherently riskier. Although I was never shut out of a commodity trade by the day limit, the fear was always in the back of my mind.

Trading costs — Transaction costs in the Forex market is the difference between the buy and sell price of each currency pair. There are no brokerage fees. For both the stock and the commodity markets, there are transaction costs and brokerage fees. Even when you use discount brokers, those fees add up.

Minimum investment — You can open a Forex trading account for as little as $300.00. It took $5,000 for me to open my futures trading account.

Focus — 85% of all trading transactions are made on 7 major currencies. In the US stock market alone there are 40,000 stocks. There are just over 200 commodity markets, although quite a few are so illiquid that they are not traded except by hedgers. As you can see, the fewer number of instruments allows us to study each one more closely.

Trade execution — In the Forex market, trade execution is almost instantaneous. In both the equity and commodity markets, you count on a broker to execute your trades and their results are sometimes inconsistent.

While all of these features make trading the Forex market very attractive, it still requires a lot of education, discipline, commitment and patience. All trading can be risky.

by Susan Walker

7 Reasons to Trade Forex

There are many money-making opportunities out there and we've been involved with quite a few, namely property marketing, web development, residential construction security, multi-level marketing businesses etc.

We've come to a few conclusions with the help of some well-known properity coaches.

Often people with the income they desire don't have the time to enjoy it. Those that have time don't often have money. You don't have to sacrifice your life-style to earn an above-average income. If you focus on the for a few months you can make that dream a reality and create time and money to do what you REALLY want.

To earn a living money is given in exchange for a product or service rendered. It needs to be sold continuously otherwise your income stops abruptly unless it's a repeat type of product or service.

Money is a medium of exchange. There's no magical formula to possess it, you need to exchange something of value for it.

What if, you could have access to thousands of customers who are ready, willing and able to buy from you whenever you wanted? Wouldn't it be great to avoid any hassles like money collection problems (just had a delayed payment from my web business), keeping difficult customers happy (we all know what that's like), competition stealing your business without providing the same value etc.

All that is possible with . You can also trade from anywhere. Take your laptop with you, find an internet connection and away you go.

Another advantage is that you don't need experience to get started. Get a traditionally job involves accumulating specialized experience, having a well-polished resume and having the right contacts. With the right training course, you can get started straight away.

Here's 7 more reasons to trade :

1. It never closes. It's open around the clock, worldwide. Trading positions open at Monday 7am, New Zealand time and close 5pm New York time on Friday. During this time, you can enter or exit the market whenever you like. It's a continuous electronic currency exchange. This is great because you can trade whenever you have spare time.

2. Leverage. Standard $100 000 currency lots can be traded with as little as $1000. This is mainly because of the ease with which you can buy and sell, some brokers will leverage up to 200 times, so with $100 you can control a 200 000 unit currency position. It's the best use of trading capital around, even banks lending on property investments don't come close.

3. Accurately predict the outcomes. Currency prices generally repeat themselves in predictable cycles so you can see what the trends are. 'Technical Analysis' helps to see these trends and profit from them.

4. Low Transaction Cost. In other words, you mistakes won't cost you a fortune. Good brokers won' charge commissions to trade or maintain an account even if you have a mini account and trade small volumes.

5. Unlimited Earning Potential. has a daily trading volume of over 1.5 trillion, the largest financial market in the world. It dwarfs the equities market (50 billion daily) and the futures market (30 billion).

6. You can make money in any market conditions. Each market is one currency against another, so when you buy in one, you're selling in another so there's no biase towards either currency moving up or down. This means it's up to you to choose which currency to buy or sell with. Yu can make money going up or down.

7. Market transparency. This is an advantage in any business or trading environment. It means you can manage risk and execute orders within seconds. It's highly efficient and allows you to avoid unexpected 'surprises'.

I hope you're now convinced that is the best investment and income opportunity around.

by Sorna Devadas


Forex The Future Investment

There are many many advantages over the various other ways of investing. First of all it is a 24 hr market, except for weekends of course. You have the US market then the european and then the Asian. One of the great times to trade is during the over lapping periods. The USA and european overlap between 5am & 9am eastern and the Euro & Asian between 11pm & 1am eastern. Usually the busiest time and best to trade.

The is also the risk factor for the accounts. With futures and options you can get margin calls that can wipe you out. If you get caught in a bad trade not only do you lose the money in the account but you may have to come up with alot more from your pocket. It can be very risking. But not in Forex. Worst case senerio you could lose whats in you account. But you would have to do something really stupid. Like making a big trade on a Fundamental day and leave it alone. If market takes a bad move and you weren't there. OOOPS. But That wouldn't happen with a smarth trader.

Then there are the demo accounts which is an account where you can trade using all the right things, platform,charts,and information. But you are using play money, or what we call paper trading too.

Plus with Forex you have a mini account. Instead of needing thousands of dollars to get into it. You can open an account with as little as $300.00. Now of course you will be trading at 1 tenth of a trade. IN other words you controling 10,000 instead of 100,000.00 These are call lots. Which also means you will only risk 1 tenth too!

So if you would love to learn to do investing and not have near the risk you really need to take a closer look at Forex trading.

by Mike Pachuta



Investing in Forex

Investing in foreign currencies is a relatively new avenue of investing. There are considerably fewer people are aware of this market than there are people aware of several other avenues of investing. Trading foreign currency, also known as forex, is the most lucrative investment market that exists. There are several factors that make this true among which, successful forex traders earn realistic profits of one hundred plus percent each month. Compared to some of the better known investment markets such as corporate stocks, this is an unheard of return on investment. It's very necessary to mention here that a person who invests in forex must, without exception, make it a point to learn the detailed, but simple strategies and information surrounding the market. This very fact is what makes the difference between successful forex traders and other traders.

A few additional points, which create such powerful leverage for investors within the forex market are: The amount of capital required to begin investing in the market is only three hundred dollars. For the most part, any other investment market is going to demand thousands of dollars of the investor in the beginning. Also, the market offers opportunities to profit regardless what the direction of the market may be; In most commonly known markets investors sit and wait for the market to begin an up trend before entering a trade. Even then, investors, as a rule must sit and wait some more to be able to exit the trade with a nice profit. Given that the forex market produces several up, down, and sideways trends in a single day, it can easily be seen that forex stands head and shoulders above other markets. Additionally there are trading strategies, which are taught that provide for compounded profits; these are profits on top of profits. In addition, free demo accounts are available within the industry of forex trading, which facilitate the sharpening of skills without the risk losing any capital. And the advantage regarding the time factor in trading foreign currency is a very attractive point for any investor. Compared to one of the most sought after avenues of investing, which often requires forty or more hours each week, namely in the real-estate market, the forex market requires a much smaller demand on the investor's time. Forex trading requires approximately ten to fifteen hours each week to earn a full time income. It's easy to see that the advantages and great leverage that exist in the forex market, make it among the most lucrative, time liberating, and easy to enter by far.

I hope this information gives you a clear understanding of how you can turn your investing into a true method of making your money work harder for you.

by Joe Clinton

Advantages of the Forex Market

What are the advantages of the Forex Market over other types of investments?

When thinking about various investments, there is one investment vehicle that comes to mind. The Forex or Foreign Currency Market has many advantages over other types of investments. The Forex market is open 24 hrs a day, unlike the regular stock markets. Most investments require a substantial amount of capital before you can take advantage of an investment opportunity. To trade Forex, you only need a small amount of capital. Anyone can enter the market with as little as $300 USD to trade a "mini account", which allows you to trade lots of 10,000 units. One lot of 10,000 units of currency is equal to 1 contract. Each "pip" or move up or down in the currency pair is worth a $1 gain or loss, depending on which side of the market you are on. A standard account gives you control over 100,000 units of currency and a pip is worth $10.

The Forex market is also very liquid. When trading Forex you have full control of your capital.

Many other types of investments require holding your money up for long periods of time. This is a disadvantage because if you need to use the capital it can be difficult to access to it without taking a huge loss. Also, with a small amount of money, you can control

Forex traders can be profitable in bullish or bearish market conditions. Stock market traders need stock prices to rise in order to take a profit. Forex traders can make a profit during up trends and downtrends. Forex Trading can be risky, but with having the ability to have a good system to follow, good money management skills, and possessing self discipline, Forex trading can be a relatively low risk investment.

The Forex market can be traded anytime, anywhere. As long as you have access to a computer, you have the ability to trade the Forex market. An important thing to remember is before jumping into trading currencies, is it wise to practice with "paper money", or "fake money." Most brokers have demo accounts where you can download their trading station and practice real time with fake money. While this is no guarantee of your performance with real money, practicing can give you a huge advantage to become better prepared when you trade with your real, hard earned money. There are also many Forex courses on the internet, just be careful when choosing which ones to purchase.

by Heather Redmond