Why Get Into Forex Trading?

There is the stock market and there is the foreign exchange market. The latter is considered the bigger opportunity-if you know how it works and if you have the money to invest. There are a lot of reasons nowadays why people are flocking to learn the in and outs of forex trading.

But why get into forex trading anyway? Are there any truths behind the big profit boon we all keep hearing about? These points are the prime reasons why the forex market is so huge right now:

Boundless Activity
The foreign exchange market is open 24 hours on weekdays. Compared to other markets that operate at specific hours and days, the forex market is a buzz of activity and opportunities in the week. Investors can react to specific changes and trends that happen within the week, anytime.

Freedom
This also means freedom from normal office hours; traders can operate whatever time they wish. Naturally, this attracts people from different lifestyles, locales and classes. If you have a laptop, then you can trade no matter where you are.

Less Cost
Add the purely liquid nature of the market and the electronic way of transacting in it then you would have a feature that will definitely attract people: the lesser trading costs. We can do away with the traditional costs that add up to your bill and concentrate on only the spreads. The spreads here are usually smaller than the spreads in other markets, and that would mean better profits.

Leverage
Unlike other markets where leverages are small, forex trading allows for bigger leverages, giving you the chances to trade up to a hundred times your investment. Brokers have features where they can give you a lot of leverage depending on the account. Of course, this also means a bigger risk of losing money. Risk management protects you from this.

Stable Price
Since your trade is done immediately, chances are the prices you saw are what you are going to get. Compared this to other markets, where your transaction often ends in a span of a day or two thus giving a chance for the price to slip and change. The stability and speed attracts a lot of traders in this market. Your assets are not tied up for long periods, giving you more control.

Transparency
Being electronic in transactions and having liquid, movable assets is easier to analyze and manage. Everything can be accessed by your platform and laptop. Your deals can be executed as per your viewpoint and strategy. This gives you a better feel of the market cycle, making your predictions more accurate each time you trade.

Stable Profit Chances
Since your trading involves two currencies and not other markets and trends, one always has the opportunity for profit. There is no bulldog watching of rising or falling of markets, goods and industries. Whether the market is bullish or bearish does not really need to worry you. What really matters is that you pick the right currency to trade.

Forex trading is considered the perfect competition for logical reasons. Everybody is presented with an equal playing field. Even if the currency is falling, it just means that there is currency rising somewhere and the opportunity of profit exists. An unlimited earning potential, the freedom, and the even opportunity makes the foreign exchange market an exciting opportunity for anyone.

Using Forex Options to Their Full Potential

Aside from signals, you can use another equally useful instrument in forex trading. Options can mean a world of difference when used wisely.

What is an option? Essentially, an option is an agreement or contract that gives power to trade currency at a pre-determined specific price. It is called such because this power is optional- the holder of the contract is not obligated to use it.

In the forex market, there exist two kinds of options:

  1. Call Options
    Call options gives the power to buy currency at a specific price. It increases in value when the underlying stock goes up. In a nutshell, what you need to do is to buy call options on a stock when you predict its price is about to go up.
  2. Put Options
    Put options, on the other hand, is the power to sell the currency to someone else at a pre-determined price. You buy Put options if in your prediction, the stock of that currency is about to go down.

Here is the point: you buy or sell the stock to make a profit by buying the options and then selling them in turn those options to someone else for a profit.

At the end of the contract, the value of those options will be what is indicated in that contract. Other than that, anytime the value of that option is the value in the current market, where the holder has deemed that he would be making a profit. He has foreseen that his call options would go up and/or his put options will go down.

It may seem complicated at first, but it will all make sense once you get the principle. Remember that call options go up and put options go down.

Now add the concept of leveraging to the idea of options and the possibilities of profit would be staggering. Leveraging is the chance to borrow your broker’s assets to trade for currency. So in effect, if you can buy put options at the right time, and sell them at the right time, your profits would greater.

Companies also use options to lower the risk in forex trades. Think of it, you can buy without being bound by the rules of the current fluctuation in the market. It just adds a new dimension to forex trading. Whether the underlying stock moves up or down, there is possibility for profit. Add to that the power of leveraging, and then we can make more profit. This only works if we can correctly call the movements of the currency stocks in mind.

And this is only the tip of the iceberg. The idea gets more complicated as we compute the intrinsic values of the stocks and how companies use options to protect themselves from risks. Nevertheless, the basic principle remains the same: by trading options instead of stock, bigger returns are possible. On the other side, leveraging can also put you in a big risk.

This is why you have to have a sound forex trading strategy first, and you are confident enough to call the movement of the stock values. Once you are ready, then the possibilities of huge profits will all open for you. Learn more about options and the flow of forex trading; they will be your prime weapons to attain market success.

Textbook Mistakes in Forex Trading

Novice and students of forex trading often overlook the obvious: many before them have made fatal mistakes. Making the same wrong decisions all over again just does not make sense. What a serious forex trader should do is to learn from them and up their game.

Relearning these assumptions and wrong steps will increase one’s chances of succeeding in the business. If you are inexperienced, then the experience of others can only enrich you. Always remember no to make these mistakes:

Wrong timing of Stops
While stops are certainly essential in forex trading, the wrong timing can topple your whole strategy. Sure, you might be thinking of putting a cork in your money leak, but the key to doing that is the right timing: the trade should still be leaning in your favor. Proper money management should be at play here. Risk should be at the minimum before placing a trade. Calculate and research your options.

Underestimating the risks of leverages
Okay, you might be thinking of instant profit if you use a 300:1 leverage on a trade. However, are you sure profit will come in? A lot of people think of leverages as free poker chips where in fact, the risks are higher. It is all about making sure you have a good solid hand. Even then, experienced traders are always careful only risk 2-3% of their investment balance on a trade. Asses your risks and gains, do not be dazzled with the money and the excitement.

Relying on signals and indicators too much
It is as if you are just a sheep following a trend. Signals and indicators are just that: assistants and cues that help you make a decision. Remember that your strategy and assets are unique to you, so technical indicators do not always apply to you. You still need to work. There is no magical formula or machine that can do the work for you.

Day trading
Some people might think that day trading holds no or fewer risks, which may be true to some. However, there is a reason why long term trading still holds: it gives you more time to wait out a position that will be in your favor, yielding more profits. Day trading can work, but only to a select few.

Getting sucked in by “miracle” software
There are dozens of so-called powerful platforms and software that tells you can beat the system and reap huge profits. Some of them can help but a lot of them are duds. The main thing to remember is that there is no sole software out there that is foolproof. It’s okay to get indicators and advice from a few, but it all rests in your acumen. Before putting your money where your program’s mouth is, you better test it thoroughly.

The same thing goes for systems and strategy on paper. Even if you have back tested it, would the conditions you have used to test that be the same conditions that will happen in the near future?

Getting overwhelmed with emotions
Forex trading requires objectivity, cool thinking and the ability to make sound decisions. Be too afraid to risk, and you will not profit at all. Be too reckless and you will lose your shirt in no time. Here is a smart thing to do: read up on forex trading psychology. Watch yourself and do not work obsessively. Have a life.

There is a reason why forex trading is so popular yet only a select few have built their careers over it. A lot of beginners have failed, but where they have fallen, you should pick up and do better.

Strategies You Can Use in Forex Trading

Being a trader in the Forex market has its ups and downs. There are times when you earn lots of profits but there are also times when you lose a great deal too. Foreign Exchange is a complicated, profitable, and risky endeavor. If you’re not ready to take some risks, you can’t be an effective and efficient trader.

Are you aware that the Forex market is the largest market to conduct trade all over the globe? This is true and so if you want to earn more money, learn how to trade in the Forex market.

Currencies are traded in the Forex market. This market was primarily created to meet the demand and supply of different kinds of currencies by individuals, companies, and government. It was also created to assist exporters and importers. Most of the traders are investors, businesspersons, speculators, businesses, and those in the industry of banking.

As you probably know by now, countries have different kinds of currencies. The values of these currencies also vary. In Forex trading, two currencies are being traded which are also called ‘trading pairs’. When you sell a currency, you’re also purchasing another. For example, you can get the British pounds by using US dollars. If there is a small supply of British pounds, you will need to pay more US dollars. In this transaction, the buyer of the British pounds hopes to sell it at a much higher price (more than what he ir she paid for it).

Speculators accept the risk of any adverse movements in the exchange rate and in the case of a favorable currency movement, the speculator can earn lots of profits.

You must have your own trading system. This is a must for all traders and beginners in the industry are encouraged to develop their own system. For starters, you can start with a small investment. With the system in place, you can easily decide when to enter the market and when to exit. The cost for every transaction is very minimal and so you can trade for as many times as you like in a day; besides, the Forex market is open round the clock.

It’s quite hard to manipulate the Forex market because it is extremely huge. The market is also often influenced by global events and news. Insider trading is definitely eliminated because of these factors.

Never enter the Forex market with limited knowledge. You must be aware that around 90% of all Forex traders suffer great loses. Only 5% are able to gain profitable results while the remaining 5% are only break-even.

You will need to have adequate knowledge about the Forex market. You can start by researching online for useful information about Forex trading. Try to choose among the many Forex software programs available in the market and you have to ensure that you’re using an efficient program. That way, you can easily monitor the activities and changes in the Forex market online. With an internet connection at home and efficient trading software, you can make educated transactions. You can’t rely on sheer luck if you want to succeed as a trader. You need to study and analyze the market trends while considering market indicators and generators. You can also get a broker to help you out with your trading concerns. You can’t keep afloat in the Forex market without adequate help and knowledge. Know the strategies to use.

So You Made a Mistake in Trading

So you have taken a loss. Okay, let us say you have taken an astounding loss. What now? It is not the end of the world. Now comes the part where you rise above the colossal mistake you have made in forex trading.

Owning up to it.

Know you have made a mistake and it is a fact. Stop blaming anything or anyone else. Owning up to a mistake is the start. The sooner that you realize that mistakes can be made and will be made, then the sooner will you get back into the game.

Learn from it.

Now what went wrong? Got it? Good. Every mistake is a learning experience. Even if the reason you realized is your own arrogance, greed, or some flaw in your calculations or in your strategy, there is something to learn. At least you know what not to do next time. The forex market is not as unforgiving as you might think. It is a place of chance and opportunity.

Try a new path.

Now you know the flaw in your strategy, reassess if you would change that part alone or totally try a new path. Failure gives us the chance to look at our plan from afar, to give us a bigger picture. If the problem seems to be your fear of losing or a system that does not fit you, you can easily see a better and new approach once you open your mind to them.

Assess the effects of the mistake.

What are the changes from your previous situation? You may find that you are not that worse off after all. You might be overacting a bit about the situation. However, if the mistake really has far-reaching effects, then better to list them. This way, you can asses which effects can be remedied and which you can do nothing about. For example, you may have lost some investment, but if you can see chance of recovering it, you will discover if it is feasible or not by listing the pros and cons.

Systematize more.

Perhaps you lacked discipline before. Then now is the best chance to wake up and make a solid system where you will base all your decisions. Learn the tell tale signs of the errors you have made so you can avoid them. Not only will a systematic approach make you more confident in making trades, but also lessen the work you normally do.

Rise up.

I know it is easier to say, but really best thing to do is be stubborn and get back in the game. They do not call forex trading the perfect marketplace for nothing. If there is currency dropping somewhere, then there must be a rise somewhere too. There is always a chance for profit. Think that if your tread the balance of taking the right risks and being conservative at the right time, then success is not too far.

As a last thought, think about the fact that you are not alone. Somebody else somewhere has made a mistake before you. In fact, those who have tripped are probably the ones enjoying success now. They have learned their lessons from failure. They have shrugged off the stigma of a loss based on just one fatal mistake. Forex trading is difficult and challenging yes, but you are always welcome to try again and again.

Seven Factors for a Perfect Fit Forex Broker

Forex brokers are a dime a dozen. What really set them apart from one another are the services and information unique to each one. How to distinguish a good one from a bad company? What are the major factors that come into play?

What you should consider in choosing one for you all depends on your trading strategy, and a number of factors.

These seven points will help you narrow down that perfect fit of a broker that will help in your fare in foreign exchange trading:

  1. Types of Account. Many forex brokers offer different types of accounts depending on the amount of capital you will put in. This is important to know especially if you are a novice or a conservative trader. What you need to do here is to research what kinds of accounts your target forex brokers have and what options each account will bring you.
  2. Demo Accounts. Some brokers offer demo accounts or accounts where you are allowed to trade by trial so that losses and gains will not reflect in your investment. This is useful for trading beginners so that they can get used to the conditions of the trade.
  3. Leverage. In a nutshell, leverage financing is the opportunity to borrow that broker’s money to make a profit if there is a chance. Your small investment may multiply into bigger gains, but there is also of course, the risk of losing money. Different broker firms have different leveraging practices, so information on what they could offer would be useful for you.
  4. Software and Platform. The more elite brokers offer up the more sophisticated technology to their clients. The platforms where you monitor your numbers, get love quotes and compare charts are essential in modern day trading. You have to know whether the broker you are eyeing on can deliver the same features and more. Most traders consider these useful platforms an essential in the business.
  5. Spread. Spread varies from account types and brokers. A lower spread instinctively means a higher profit for the investor. This is where your profit would come from so it is logical to research about what types of spread, whether fixed or variable, is featured by the broker.
  6. Fees. Fees like rollover fees for held positions are pretty much standard for most forex brokers. There are also many fees that you do not know about. The good news is that some brokers cancel these fees away on special accounts if requested.
  7. Support. When there is a feature in the software you cannot access or a flaw in the platform you must fix, a forex broker’s technical support may just win your loyalty as a client. Assistance in whatever you need, whether it is software, hardware or even sound advice is a prime asset of a good broker company. It is what keeps the clients in.

Of course, there are lots of other minor considerations and features that distinguish one forex broker from the next. These seven points will give you a basis, while your trading strategy and specific needs will dictate the rest. Research and scrutiny will point you to the right decision of who gets to handle your investment and gets your loyalty in the long run. Forex trading is a working partnership with your forex broker, and a long-lasting relationship can only benefit both sides.

MM and ECN: Making A Killing with the Right Forex Broker

MM and ECN: Making A Killing with the Right Forex Broker

If you have already figured out your forex trading strategy by now, you are not in the clear yet. Now comes the part where you get to choose the type of brokerage firm that will fit in seamlessly with your plan.

A forex broker in essence, is the one that will keep an eye on the markets for you, and acts up as your partner in setting up your orders.

There are two major kinds of forex brokerage firms. Knowing their differences is important on your way to dominating the market. Not understanding the advantages of each can set you back a lot of time and/or money.

MM: Market Makers
What is important to understand about Market Makers are the fact that they are the ones who set the asking price and the bid price. As your trading partner in buying or selling, you grant them authority in handling your money.

An MM institution acts as an exclusive liquidity provider, giving services that is otherwise not found on any other brokerage set-ups. In simple terms, they sell for you as well as buy for you. Think of them as a place where they do all the work for you.

Understanding how MM makes a profit is simple. When you finally decided to buy, you buy from them. They in turn will go to other brokers and buy at slightly better rates to sell to you. The difference in rates is their profit. Think of it as the exchange from the work they have done you would have otherwise done yourself.

The advantages of MM:

  1. They have set spreads, freeing you from the anxiety of the fluctuations in the market.
  2. Since they work for you as a partner, your orders are assured.
  3. They are usually user-friendly, easy to access and understand. Software and platforms are easy to get.

ECN: Electronic Communication Networks
Electronic Communication Networks on the other hand, place your order in a bid and lists all the asking prices for it. The asking prices come from many market participants, if their sell order matches your order.

If there is no match, then your order will not push through. ECNs are not obliged to fill your orders; rather, it is up to you if you will agree on the other ways’ bid/price.

The advantages of ECN:

  1. Prices are more aggressive, so scalping is ideal here.
  2. You can also take the role of an MM and mediate between trades, making a profit for yourself in the differences of rates.
  3. Because there are many sources, bid/ask prices are better and more diverse than MM prices.

Choosing which one to put your focus on depends entirely on the kind of strategy you have, whether you plan to trade conservatively or aggressively. Different brokers fulfill different demands, and the services they give set them apart. These two are just the major kinds, and now you can seek out that broker that leans on the type you consider will best work out for you.

The advantages of the two help a lot of diverse-thinking forex traders apply their strategies. Most of them maintain a strong account on both in order to maximize the potentials they have. Learning to play in both fields is a step closer into bringing about a successful career in forex trading.

Is Forex Scalping For You?

Forex trading takes in all styles, different methods and unique strategies from its diverse number of traders. One mode of earning in the forex market hits a popular and buzzing note- forex scalping.

What exactly is forex scalping and can it work for you?
Forex scalping is simply put, a method of earning profit in day trading by taking small earnings in a regular way. This accumulates to a big amount in the long run. Usually, it is done by day trading. The problem is they do not work. This is considered to be just a big scam by others.

However, why is it so popular?
Because a lot of people are promoting it on the net, promising huge returns with minimal effort required. They support this with impressive track records that appear on their sites. This is the reason why they are so popular: marketing organizations promote their site on search engines, making it look like that a lot of people have already profited from it.

Another reason why it is so popular is the fact that many people motivated by greed and easy profit are naturally attracted to this proposition. Of course, when they join, they lose money. Not only do they lose money when they buy the system, they lose more when they trade with a faulty strategy. That is what creates the buzz.

Why doesn’t it work? We can simply explain that prices and rates in day trading are very volatile. There is no assurance that you will profit. It is only made so by the stories of those who want to sell their mock software and plans. These juts simulated and hindsight plans did not really happen and in turn, did not really earn some money.

Scientific theories are just that- theories. If they have been proved, then they are no longer theories and hypotheses. Experienced traders have learned not to listen to them. Take a cue and follow suit.

Here are some tips to avoid getting caught into this scam:

  1. Trade longer term and forget about day trading. In longer term, the profits are stable. You can also practice short term trading which is different from day trading in terms of time frames. The key is to understand that rates per day are too volatile to rest our investments on them.
  2. Know that if it is too easy, then probably it is not true. If scalping works, then nobody would be trying to sell the method, right?
  3. Get a full understanding and education of how forex trading works. Simulate first and try mock up trading. Learn and understand how the market works.

Will forex scalping ever phase out in the forex trading market? It probably will not be for a long time. They can repackage the system and presentation to lure other inexperienced, lazy would-be traders. Nevertheless, remember that if you trained properly and understood how the market works, then there is no danger of falling into their trap.

Bottom line is, ditch forex scalping. Forex trading was built on tested principles and unique strategies in predicting the closing rates and watching closely how the market flows. It is not some naïve market where you could bully your way to success with some scientific theory and fancy software platforms.

Indicators for Forex Trading

Some people find Forex trading very difficult. The reason behind this is because they did not spend adequate time in studying the market trends and they did not conduct thorough technical analysis. Forex charts are very important and you need to know how these charts are developed. As you probably know by now, the Forex market is a fast-paced environment and you need to keep up with it if you want to earn good profits. Technical analysis can definitely help you and so can market indicators.

Indicators are quite helpful especially when you’re about to make a transaction in the Forex market. Most of the time, these indicators provide you with market’s probability behavior but it can’t exactly tell the certainty of currency prices.

Technical indicators are very important in Forex trading. You can combine the indicators to create your very own trading strategy in order to recognize the market trends. As an effective trader, you must be able to identify the current or major trends, the short-trends, and intermediate trends; if you can do this, you will be able to hold a good position in the Forex market where you can earn great profits.

Since the Forex market is changing constantly, you need set a criterion for using the technical indicators. If you want to get the highest probability and accurate predictions, you must be able to combine required indicators. By doing so, you can determine the price behaviors of the currencies you would like to invest on.

Supposing that your judgment is correct, you should still consider other factors in order to gain maximum profits from your trades. If you’re having a bad day in the Forex market, take your profits and stop trading for the moment. This is a smart decision because if you stay longer (hoping to regain your lost money), you might lose more of your investment. When the prices of the currencies are moving within a so-called narrow range and isn’t going anywhere, there is no need to anticipate for a big movement. Find another currency to trade with better profit potentials.

With so many technical indicators to use, you will surely find combinations that will work best for you. Don’t be discouraged if ever you encounter some downfalls in Forex trading because that’s natural. When using technical indicators, you must give yourself enough time in doing the analysis and studies. There are so many things to consider and you can’t just do it in minutes. However, make sure that you don’t take too long in making your trading decisions because the Forex market will not slow down just to work for you. You’re the one who needs to adjust to its fast-paced environment. Keep in mind that there are also lots of traders out there who want to earn profits. You need to keep up with the competition.

Technical analysis is not very easy to do and so you will need all the help you can get. You can consult a broker or some online Forex trading tools if you want to learn more about this kind of trade. The internet is widely available and you can use it to your advantage. Educate yourself about these various technical indicators so that you can use them in identifying the market trends. For successful Forex trading, you must learn about these technical indicators.

Forge Your Forex Trading Strategy

So you think you have the winning strategy for forex trading. Have you tempered and tested your winning formula yet? What you do not know is that there things you must take note before fully placing money on your strategy.

These are points tested and tried by those who have come before you. Understand the principles behind them and you may well be on your way to trading success.

Think twice before day trading.
So few get to be successful at day trading. Most experts firmly believe that it does not work, because the volatility on such a short term varies a lot. You will be better off with a long term trading ventures where chances of profit are dependable.

Fundamental or technical?
Are you a fundamental or technical trader? Where does your strategy lay? It is hard to be both; combining the two paths and methodology are at times near impossible and at most difficult. It would be easier to start with a technical aspect of trading in your strategy. Not only would it take into account human psychology, but it will also be easier to work with.

Throw scientific theories away.
We all know forex trading needs and objective point of view. Nevertheless, when it comes with your personal strategy, it must fit with your assets, investments and plans. That is why it is difficult to rely on scientific theories alone. If there was truly a successful one, then why isn’t everybody a millionaire?

The objective part of the equation should be the trading signals you need to use in determining your next move. Now you see that there is balance in the tempering of your strategy.

Discipline
You work in conjunction with your strategy. Are you both discipline din your tasks? Ego might get in the way of a successful and fair trade. What you think towards the market affects the design of your trading plan. Be fair and reasonable and you will profit, being over your head and thinking greedily will get you nowhere but down.

Confidence
Lastly, do you have absolute confidence with your unique plan? Testing and back testing with present parameters is essential to get that confidence. You may even want to start with a small amount first, testing your strategy with as little risk as possible. When it works, resist the urge to change it drastically. Do not over complicate your details.

Hypothetical track records are unreliable.
These kinds of track records are just keeping up and expecting the norm of currency track records. This is simply just too naïve. Playing it safe will not always make you safe. Forex trading is much more difficult than choosing which currency record is safer. In the end, you have to make money right? Not make sure bets and not losing, but end up not gaining anything either.

Is your strategy designed to use stops conservatively?
Stops are there to your advantage. Use them. Most people place them immediately after a trade. If you think hesitate a lot, you will end up taking more losses.

Simple and work reasonable
The design of your forex trading strategy should be simple, and requires reasonable amount of input and work from you. Too complex a plan and you might lose sight of your own unique technique. Too much work will take its toll from you, clouding your judgment more.