Thursday, December 17, 2009

What Is Forex Online Currency Trading?

Did you know that losses can be higher than gains with most automated Forex trading systems for the average user? Most investors lose money because they lack the necessary knowledge to make profit by professional speculation. The trading system choice nevertheless has a word to say in the matter, particularly with the huge advertising pressure. Do not take into consideration ads like 'scalp 30 pips a day', 'make a living' or '90% rate of success'. Remember that nobody knows tomorrow's prices, it is all pure speculation. Therefore, you can learn the hard way that real time track records don't work as expected.

Do you have confidence in Forex online currency trading? Where does your money go? There are inevitable periods when prices drop, which usually happens in relation with major world events. Without solid knowledge of the day trading software venturing into an investment could be a financial suicide. One suggestion to keep major losses away is to avoid those Forex online currency trading systems that don't reveal their operating methods. Plus, if you are a newbie, don't jump into day trading! When you open the business day, always start from the premises that the system is at its worst.

Subjective judgment is the basis of Forex online currency trading, and working by subjective rules you'll need to invest quite some time into the market analysis.If you operate with a financial automatic tool that registers market fluctuations, you can reduce the time work to some twenty or thirty minutes per day. Then, you can hire a dealer to operate on your behalf or you can work independently. Even with dealers, there is no escape from risks. Avoid working with service vendors that do not reveal their history, operation model and who don't answer your questions.

Fear and greed usually influence the balance in any online currency trading Forex, and calculated investors who don't live by their impulses and carefully analyze transactions will profit most. If you become knowledgeable in Forex online currency trading, you considerably reduce risks and expect great gains. Use Forex charts to identify the price trends and spikes and in time you'll learn how to decode the signs that indicate a turn in the direction of prices. Lots of speculators lose significant sums of money with the market tides, and you'd better not be one of them!

Friday, December 11, 2009

Risk and Your Forex Trading Style

The most important part of any style of investing, is being aware of what level of risk you are comfortable with. Without a good knowledge of this, you will not only tend to over extend yourself but also jeopardize your capital base. Every Forex trading strategy carries its own risk parameters and these tie in directly with your risk tolerance. Then there is your style of trading, conservative, moderate, and aggressive.

Initially you may decide to trade a day chart. The trading movement over a day can be hundreds of pips, so when you protect your position you have to assess what your drawdown parameters are. If your money management stipulates a 3% funds exposure, you will find problems on day charts unless your account is substantial.

The 5M or 30M charts maybe more tradable since the pip variation tends to be less, so your stop strategies can fall within your management range.

Yes, we all want good returns from out trades, but jeopardising ones account to wide stop positions and large draw-downs is going to burn out your account and trading career in the blink of an eye.

A practical risk level is 3% or $300 on a $10,000 account. Convert this to pips, 1 standard lot ($100,000) has a pip value of $10 so if you trade end of day and your stop loss placement, whether count-back or support and resistance or any other, indicates a 100 pip stop position, then you are not risking 3% but 30%! Three adverse trades and your account has vanished!

An aggressive trader is open to taking riskier trades that a conservative trader. They may be prepared to expose larger amounts of money in riskier trades with the hope of achieving larger returns – often over longer trading time frames but they may still use the similar strategies for shorter times as well. Very much the ‘crash and burn’ trader.

So where do you think you sit? Are you a disciplined trader with good money management and risk rates, or a trader that will take high risks for big pips? If you are the latter, you will not be trading for long, that’s a guarantee.

If any of this leaves you a bit bewildered, you need to understand what you are about to do with your hard earned funds, so begin by getting your Forex training with Top Dog Trading, you will learn a considerable amount and it will help you trade with safety to win pips not risk everything.

Monday, December 7, 2009

The Riddle of Forex Brokers

Forex (Foreign Currency Exchange) traders spend a lot of time worrying and talking about their various concerns about the retail brokers they engage to handle their trades. The prevailing assumption is that whenever you attempt to make money in forex you are plying your talent against 'the market' and that's the only competition you should be thinking about. In truth, there is so much more to it; the broker who is honoring your trades can strongly impact your ability to make money.

Bucketshops are agencies who take unfair advantage of their traders by working against them and often by changing the prices they give. Very few agencies will own up to acting this way, mainly because it gives them a powerful incentive to cause their clients to lose. Another phrase often used for such companies is 'Market Makers'. These companies are making the market that their customers trade in, rather than sending their orders on to the broader market. A hard examination of the world of currency, though, reveals that such a policy is actually necessary to making it possible for small retail trades to be placed, and although it is frequently abused, it is not necessarily a nefarious way of doing business.

The reason this is true is because there is no real 'Forex market', like there is for ordinary types of trading. To demonstrate this, company stocks are available only on traditional stock exchanges -- the New York Stock Exchange being one of the most prestigious. Every trade that are executed through exchanges like the American Stock Exchange is cleared under the auspices of the exchange, traded in accordance with the standards of the exchange and moved through brokers that are regulated by the exchange. Stock exchanges set the daily hours for business and have the authority to determine whether any stock or brokerage should be removed or suspended due to policies which run the risk of compromising the overall market. They exist at actual physical addresses and are themselves monitored by government offices.

The Forex market, by contrast, is made up mostly of major organizations that need to swap currency with other nations. They are major players; financial groups and large conglomerates which desire to convert capital from one currency to a different one so that they can trade goods from one country to a different one. Consider when a corporation in Australia markets some products in Canada. The payment will come as CAD, but the business will need to pay for its bills in Australian Dollars. It will need a convenient means to transfer its currencies virtually every business day. Companies like this and the banks they employ to exchange the currency are the real market, and small time traders are incapable of trading in this environment; we simply don't have the significant amounts of capital that would be of interest to the real currency players.

That's why retail Forex brokers trade with their own customers. These brokers can take in smaller trades of the variety we can do, and then they just bundle them together. Then they execute more substantial offsetting trades on the broader market making use of agreements they've made with 'Liquidity Providers'. With our tiny accounts we could never attract the attention of the big time banks. It just wouldn't be reasonable for them.

And so, retail brokers needs to give out price values to its clients, but there's not any central exchange that assures the prices at any given time. A broker must work with prices fed to it by its bank(s) which may not be in tune with the prices provided by other liquidity providers. Those variations are evident in the variation between broker quotes. From this fact arises the necessity for a brokerage to make the market for its clients, not purely from a penchant to screw them (although some few most likely do). Any ethical retail broker will not endeavor to gain from its clients by manipulating prices, but it has to nonetheless take the other side of its customers' trades so that they can honor them.

So, to sum it up, we see that retail brokerages have the need to take the opposite side of all except the most sizable of their clients' trades, however they should not use this to unethically work to their detriment. With these circumstances the Forex speculator - particularly if he is just starting to learn forex - has to look out for his or her own interests. It is important to always carefully watch the price quotes and trade executions of their agency, and to pick that broker sensibly. It would be uncalled-for, though, to conclude that a broker who takes the other side of a client's trades is doing so to screw them. It is an indispensable, if distressing part of the retail foreign exchange business model.