Sunday, January 30, 2011

Forex Trading Systems

Despite the apparent simplicity of the forex market: buy a currency at one value and sell it at a higher value to make money, or conversely, sell a currency at a value and buy it back at a lower value, there are literally hundreds of extremely complex “systems,” for sale. These forex trading systems suggest it is possible to predict the direction the market will take. These systems are inherently very complex because they are attempting to predict a very complex pattern.

Many of these systems are not available without an outlay of money, either wth a deposit at a broker or buying the system outright. Which in itself raises a question: are they worth the money? Unfortunately there is only one way to find out for sure - Buy one and see.

In any event, if it doesn’t work, the cost of the system will likely pale in comparison to the trading losses and if it does work you will hardly notice the expenditure, so there is actually a good argument for trying several systems and seeing if any of them do work.

Once the decision is made to begin trading in foreign currencies, this implies a willingness to risk a substantial amount of capital and a few hundred dollars spent on someone’s system is neither here nor there.It is not worth investing in the forex market as a day trader using a “mini account,” because a few hundred dollars at a high leverage can be wiped out in moments and any broker who suggests an investment of this size should be avoided like the plague.

The minimum lot is 100,000 units. A $1,000 deposit gives you the opportunity to buy one lot with US dollars as the quote currency, assuming a leverage of 100:1 – with no margin for error, which means a reputable broker should not accept a deposit of less than $2,000 - $1,000 for the trade and $1,000 to cover your position and the spread (broker's commission) – a 1% move against your position and the broker will shut you down.

Some things to bear in mind when considering buying a forex system or choosing a broker’s forex trading system.

* Who is selling the system and are they in any way able to be contacted?
* Who is saying the system works - Is it an acquaintance of yours whom you know to be successful as a currency trader or a random blogger on the internet?
* It is in a broker’s interest to have you make as many large trades as possible – the bigger the trade and the more often you make trades, the more money the broker will make and most forex trading systems will fail - They work on a commission only basis. It makes absolutely no difference to the broker whether you are profitable or not – they will get paid.
* Trading with a demo or practice account is different from trading with actual funds. Some of the demo accounts work using historical information rather than genuine, “real time,” information, and we all have 20/20 hindsight. Also, whether we care to admit it or not, we behave differently when real money is on the line. It’s human nature – if it makes no difference if you lose the money, (i.e it’s fake money in a demo account) the emotional attachment will not be there and you will make different decisions.

Forex Trading Guide - FX Trading for Dummies

Forex Trading Overview

Forex trading, or the foreign exchange trading market (also commonly known as FX trading or simply, currency exchange, involves trading one currency for another. Forex is by far and away the largest financial market in the world. Trades are made between large banks, central banks, currency speculators, multinational corporations, governments, and even the other financial markets. According to The Bank for International Settlements (BIS), a world-wide central bank organization, the average daily trade in the global forex and related markets is currently over three trillion US dollars – A DAY. This is several times larger than all the U.S stock markets combined. The trading is done from all round the world, with little or no hard cash changing hands.
Forex Trading Made Simple: A Basic Guide On How To Profit From Foreign Exchange Forex Trading Made Simple: A Basic Guide On How To Profit From Foreign Exchange
Amazon Price: $3.99
Forex Trading Made Simple: A Basic Guide On How To Profit From Foreign Exchange Forex Trading Made Simple: A Basic Guide On How To Profit From Foreign Exchange
Amazon Price: $15.95
Your Guide to Successful Forex Trading Your Guide to Successful Forex Trading
Amazon Price: $0.99
FOREX Best Selling Trading Robot - Trade Currency online 24 hours a day with the same system the Pros use to scalp the market. Fully automated - No programming required - Plug & Trade. Make Money from home with No stress. FOREX Best Selling Trading Robot - Trade Currency online 24 hours a day with the same system the Pros use to scalp the market. Fully automated - No programming required - Plug & Trade. Make Money from home with No stress.
Amazon Price: $95.00
Forex Trading vs Stock Market

Two of the main differences between (and some would say advantages over) the forex market compared to the stock market are:

1. Trading hours. The forex market is open 24 hours a day. Trading is done over three continents, allowing a trader to trade continuously and to react immediately to events and new developments. The market opens on Sunday evening and closes Friday night.

2. Commissions. Electronic trading and competition have brought about a sizeable reduction in the bid-offer spread (the equivalent of commissions). The spread covers the risk of the market maker. The spread for the majors remain very low, but can increase as the liquidity of a specific currency drops. Despite recent reductions of commissions through online stock brokers, the Forex market is considered, by some, to have the lowest commissions relative to trade size when compared to other financial markets. This is also in part due to the 100:1 leverage offered by most trading houses. A client with a $10,000 deposit can leverage this to $1,000,000. Some electronic communication network brokerages have introduced a per trade commision alongside a narrow pip spread.

Many retail trading houses would suggest that the large size of the market makes it impossible for a speculator to affect the market. This is not quite the truth - the stakes are higher, larger quantities of money are involved, and the bigger banks spend a lot of time and effort trying to manipulate the market. Governments have been known to step in and affect prices.
"Buy the rumor, sell the fact."

The price of a currency tends to anticipate the effect of a particular action before it occurs and, when the event comes to pass, react in the opposite direction. This is also referred to as a market being "oversold" or "overbought".

Unlike the stock market, where retail clients (individuals) have access to almost exactly the same prices as all other participants, the Forex market has several different levels of access and therefore commission costs or spreads. At the top are the largest investment banking firms such as Citi and Deutsche Bank, where the spreads or the difference between bid and ask prices are tiny. These spreads are a closely guarded secret, not normally known outside the inner circles of international finance.

Further down the trading chain, the spreads become wider. Basically, the larger the volume of trades, the narrower the spread. After the major top-tier banks come the smaller investment banks, large multi national corporations, pension funds, insurance companies and, more recently, some of the major retailers. Retail traders are a small fraction of the market and may only participate indirectly, through brokers or banks.

There are many influences on the value of currency when compared to other currencies, but the Forex market is almost a pure supply and demand market. Demand rises or supply falls, prices rise and vice versa. Electronic trading is slowly increasing in the Forex market with Algorithmic trading increasing also.

Spreads in Forex Trading

The BID price is the price at which a client can sell a unit of the base currency (in return for buying the secondary currency) and the ASK/OFFER price is the price at which a client can buy a unit of the base currency. For example, if the quote for the exchange rate of the Euro/U.S. Dollar in the market is 1.2583/1.2586, this means that the client can pay $1.2586 in order to buy one Euro (the base currency) and will receive $1.2583 if one Euro is sold. The BID price is lower than the ASK price and the difference or 'spread' between the two numbers is measured in 'pips' (3 pips here) and represents the profit of the dealing room or trading house.

Retail Forex Trading

Retail forex brokers or " market makers ," working on behalf of retail clients only handle a tiny fraction of the forex market. One retail broker estimates the total retail volume at $25–50 billion daily, which is approximately 2% of the whole market. Nonetheless, this is a substantial market for the individual trader and the ready availability of good quality trading platforms means this is an ever growing segment.

All You Need to Know About Forex Trading

There are literally thousands of people who aspire to make a fortune from currency trading or forex trading. Seeing traders earn thousands of pounds everyday while you slog in a 9 to 5 job to make 1/4th of that amount in the entire month can stir the curiosity of anyone indeed.

Although the lucrative potential in this market is quite evident but how to take a bite of that pie remains a mystery for most traders, hence there are only a few perseverant traders who actually taste success in the forex market.

One of the primary reasons why many people fail to decipher the bright side of the forex market is the insufficient availability of good knowledge (Yes, including what is available on the Internet). And even when you find some resource, it usually uses such technical jargon that beginner level traders find themselves completely lost. What more? If you chance to find any good resource, more often than not you may find yourself having to pay to gain full access to the complete guiding material.

In such a scenario, mere survival in the forex market seems to be a big challenge, let alone earning a living from it. Being a forex enthusiast and a successful trader now, I completely understand your struggle and have thereby set up this resource site to help people solve this mystery of success in the forex market, understand the undercurrents of this vast market, and make the most of the opportunities that forex market throws their way.

From useful information to selecting the right forex brokers, you can gain all the necessary guidance here that any beginner or advanced trader may need, and that too in an easy-to-understand language and all for free.

Naturally so, many of you might be thinking as to why am I so interested in sharing my trading knowledge with you all? It’s simple! Unlike other work environments, there is no competition between the traders in the forex market. So, your gain would never mean my loss. It’s not that we are not humans but this is what the nature of the forex market is.

Traders are never competitors, so we dwell in a healthy, mutually-helpful work environment, where I would never be at loss, even if I assist you in your forex endeavour. So, being passionate about the market, it gives me great joy and satisfaction in helping other forex enthusiasts.
How to Start Forex Trading?

If you have finally made up your mind to take the plunge into the forex waters for additional income, the foremost thing that you would need to begin trading is a good forex broker. You may take a look at some of my tips for choosing a forex broker, or you can take a look at the comparison chart below for the best forex brokers in the market, or directly visit the forex broker reviews page for detailed-reviews.

Although if you are not very confident about your understanding of trading basics and strategies, it is advisable that you browse through the site first and educate yourself before you try out even a demo account with any forex broker.

Best Forex Brokers 2010

Forex Brokers 2010 Minimum Deposit Regulation Free Demo Account Leverage Spread Value Customer Support Apply
#1 Easy Forex

$200 US & EU Approved No 200:1 3-7 pips Excellent
Open to both UK and US traders, Easy Forex is an ideal platform for traders with low budget. The professional yet easy-to-use platform offers a superb value for their great features, ultimate support and unrivalled tools. Every trader is also provided with their personal account manager for any guidance. With regulation from both EU and US, you can be sure that it is the most reputable and secure trading platforms around. More information...
#2 eToro

$50 EU Approved Yes 200:1 2, 4 and 6 pips Good
If staring at complicated graphs and charts bore you to death, be sure to give this innovative forex platform a try. eToro really makes trading fun. You may even feel like you are playing a game while making some serious money. Primarily focused at attracting new traders, the bonus of up to $1000 offered on first deposit is another eToro plus. More information...
#3 Forex Yard

$100 N/A Yes 200:1 3-5 pips Good
In case you passed on Easy Forex and eToro, chances are that you are an experienced broker looking for a highly advanced trading platform. Forex Yard tops the charts when it comes to trading at expert’s level. Though you may get started with a minimum deposit of $100, professional account with a minimum deposit of $1000 is highly recommended for experienced traders. Easy-to-use platform, competitive spreads and leverage, loss protection features, all make Forex Yard a great pick for advanced forex trading. More information...