Wednesday 30 April 2008

What Tools Do I Need to Start Trading Forex and Costs

A computer with a high-speed Internet connection and all the information on this site is all that is needed to begin trading currencies online.

What Does It Cost to Trade Forex?
An online currency trading (a “micro account”) may be opened for with a couple hundred dollars. For a micro account, I'd recommend at least $1,000 to start. For a mini account, I’d recommend at least $10,000 to start off.

Why Trade Foreign Currencies?

There are many benefits and advantages to trading Forex.

Here are just a few reasons why so many people are choosing this market:
• No commissions.
No clearing fees, no exchange fees, no government fees, no brokerage fees. Brokers are compensated for their services through what is called the bid-ask spread.

• No middlemen.
Spot currency trading eliminates the middlemen, and allows you to trade directly with the market responsible for the pricing on a particular currency pair.

• No fixed lot size.
In spot Forex, you determine your own lot size. This allows traders to participate with accounts as small as $250 (although I explained why a $250 account is a bad idea).

• A 24-hour market.
There is no waiting for the opening bell - from Sunday evening to Friday afternoon EST, the Forex market never sleeps. This is good for those who want to trade on a part-time basis, because you can choose when you want to trade--morning, noon or night.

• No one can corner the market.
The foreign exchange market is so huge and has so many participants that no single entity (not even a central bank) can control the market price for an extended period of time.

• Leverage.
In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make nice profits, and at the same time keep risk capital to a minimum. For example, Forex brokers offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on. But leverage is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gains.

• High Liquidity.
Because the Forex Market is so enormous, it is also extremely liquid. This means that under normal market conditions, with a click of a mouse you can instantaneously buy and sell at will. You are never "stuck" in a trade. You can even set your online trading platform to automatically close your position at your desired profit level (a limit order), and/or close a trade if a trade is going against you (a stop loss order).

• Free “Demo” Accounts, News, Charts, and Analysis. Most online Forex brokers offer 'demo' accounts to practice trading, along with breaking Forex news and charting services. All free! These are very valuable resources for SMART traders who would like to practice their trading skills with 'play' money before opening a live trading account and risking real money.

• “Mini” and “Micro” Trading:
You would think that getting started as a currency trader would cost a ton of money. The fact is, compared to trading stocks, options or futures, it doesn't. Online Forex brokers offer "mini" and “micro” trading accounts, some with a minimum account deposit of $300 or less.

Tuesday 8 April 2008

Forex Advice and Tips

I have here a few tips and pieces of advice to follow when trading spot forex, like I always say, forex trading is not for everyone so be sure you really want to go into it before you take the plunge.

1. Never add to a losing position.

2. Always determine a stop and a profit objective before entering a trade. Place stops based on market information, not your account balance. If a "proper" stop is too expensive, don't do the trade.

3. Remember the "power of a position." Never make a market judgment when you have a position.

4. Your decision to exit a trade means you perceive changing circumstances. Don't suddenly think you can pick a price, exit at the market.

THE MARKET HAS CHARACTER
5. In a Bull market, never sell a dull market, in Bear market, never buy a dull market.

6. There are times, because of lack of liquidity, or excessive volatility, when you should not trade.

7. Trading systems that work in an up market may not work in a down market.

8. There are at least three types of markets: up trending, range bound, and down. Have different trading strategies for each.

9. Up market and down market patterns are ALWAYS present, merely one is more dominant. In an up market, for example, it is very easy to take sell signal after sell signal, only to be stopped out time and again. Select trades with the trend.

10. A buy signal that fails is a sell signal. A sell signal that fails is a buy signal.

11. It's always easier to enter a losing trade.

12. If you are feeling superstitious; don't trade if something bothers you.