What To Look At When Selecting A Forex Broker?

If you are new to the business of forex trading, one of the first things you will want to do is find a suitable broker to help you with your trades and to get you started as soon as possible. Since we are talking about the largest market in the world, it is to be expected that a lot of options will present themselves to you. The fact that so many people are dealing with forex trading means that many brokers out there are fighting for each client and the logical question that comes to mind is – how to pick the right one?

Selecting A Forex Broker | Questions

Before you compare them, you will want to acquire as much information as possible about your potential brokers. One of the most important things here is whether or not a broker is registered with any regulating organizations, such as the FSA in the United Kingdom or the CFTC in the United States. If they are, this will give brokers a lot of credibility, while in the other case you may want to cross out that broker from your list of candidates. Don’t forget, scams are possible and you need to protect yourself as much as you can – for more advice click here. Information on how much leverage a broker is prepared to give you can also be very useful, as well as the knowledge about their premium services. You also may want to know how wide are the spreads offered and are they fixed or non-fixed. In short, you need to research every broker thoroughly and only then will you be able to make the right decision.

Selecting A Forex Broker | Other Steps

Now that you have all the information you can simply compare the broker and see which one satisfies your needs and best suits your trading style. Check their account types, deposit and withdrawal options, trading platforms, customer services etc. Pick at least two that satisfy you criteria and then open a demo account with them, so that you can see how they really work. Demo accounts are usually offered by brokers and the let you test everything you want to see in action, but with no threat to your money.  Use these accounts to gain first-hand knowledge about how your chosen brokers operate and then compare them again. By this point you should be informed enough to make the right call and you can start thinking about making your first deposits.

Selecting A Forex Broker | Conclusion

Choosing a broker is something that should not be done in a hurry. You need to research everything right down to the smallest detail and do not be afraid to ask questions. Use every possible resource to gain information, feel free to contact customer supports and test brokers through their demo accounts. Your broker must fit your style and needs perfectly, only then you can get the most out of your investments.

Understanding Forex Leverage

Foreign exchange is the world’s largest financial market which deals with currencies on a global scale. Since we are talking here about trading which is a constant and present just about everywhere, it is no surprise that it elicited development of a huge industry aiming to make profit out of these trades. Naturally, this industry has a lot of tools for the job and one of the most common and significant ones is the concept of leverage, something that can help you increase your profits exponentially.

Understanding Forex Leverage | About

Forex leverage is basically just a loan you, as an investor, take from your broker in order to start trading with currencies. To do that, an investor must first open an account with their broker – find out more about brokers here  – and make a deposit, depending on how big a margin the broker needs. The margin is closely related to the total value of the trade, so if, for example, a broker asks for a 1% margin deposit and you deposit $1000, you will be able to make trades which are worth up to $100.000. This is where the leverage comes in because the trader can apply it up to a certain amount to his/her investment in order to substantially increase profit margins. This is needed because the currency prices usually change in pips (fractions of a cent) during the day and no real money can be made without the leverage.

Understanding Forex Leverage | Example

Suppose that we have applied a 50:1 leverage to our capital of $1000 and we have a ratio of currencies we want to invest in. We know how much a pip is worth for a predetermined standard lot (let’s say that a standard lot is $10000 and we have invested in five of them, because of the leverage;  50x$1000) and then we see by how many pips the ratio has changed. If we have guessed correctly the direction in which the ratio will go, we will earn the price of a single pip multiplied with the number of pips that have fluctuated and the number standard lots we used in this trade.

Understanding Forex Leverage | Use

Studies have shown that the more conservative and careful traders tend to be much more successful when it comes to forex trading. They usually take much smaller leverages which have a higher probability to yield some smaller profit and then continue building their fortune step by step. A smart implementation of stop and limit orders also plays a significant role here, as it helps prevent potential losses.

Understanding Forex Leverage | Conclusion

Leverage is almost a necessity when we’re talking about forex trading. It enables traders to make some decent profits with relatively small amounts of money invested. However, leverages should be used carefully because fortune in this kind of trading does not come overnight. As with many other things in life, patience and moderation are vital to a trader’s success.

How To Avoid Forex Scams?

Scams are, unfortunately, present in almost any type of market, especially the unregulated ones which conduct trades over the counter. Whether we are talking about forex, binary options or some other form of trade, there will always be individuals who will try to disappear with the money which doesn’t belong to them. Scams and people who use them have been present for a long time and when you decide to start trading, one of the most important things you will need to know is how to protect yourself as a trader. Here are a few pointers.

How To Avoid Forex Scams? | Brokers

As we have already mentioned in one of our previous articles, the first thing you need to do is check if your broker is registered with any regulatory institution such as the NFA and the CFTC in the United States or the FSA in the United Kingdom. If they check out here, they are probably quite reliable because these institutions are known for some very serious actions against the scammers in the past as they tried to end some of the more popular scams. Thorough research of every broker available to you is your best weapon against scammers that pose as reliable brokers.

How To Avoid Forex Scams? | Types of Scams

One of the most famous types of scams is the so called “Ponzi scheme”. Similar to a pyramid scheme, this scam uses new investors’ funds to pay its earlier backers before eventually collapsing completely. “Robots” or forex-developed trading systems are also quite popular in today’s market. They are advertised as systems which automatically make profitable trades for you and all you need to do is buy the system, sit back and watch the money come in. In reality, these types of programs often choose trades at random and you end up losing money on the market. A way to notice these kinds of scams is if the asking price for a system is too high because the price of a proper system is a few hundred dollars. Signal sellers have also recently seen a surge of scammers among their ranks with traders paying a certain amount of money for some exclusive trade recommendations which are supposed yield significant profits in a very short time period. Of course, this regularly does not turn out to be true and the scammers usually simply take the money and leave.

How To Avoid Forex Scams? | Conclusion

Research and knowledge are your best weapons when you’re trying to protect yourself from scammers. Don’t be afraid to ask questions, demand independent evaluation results etc. Inflated prices of some trading systems may also provide you some clues to the true agenda of the people selling them and promises of huge profits in almost no time at all with minimal or no effort should also make you question the offer in front of you.

Forex Trading For Dummies

Forex (foreign exchange) is an international market dedicated to trading currencies from all around the world. There is no central market needed to conduct trade because everything is done electronically, over-the-counter. This is also the biggest financial market in the world as the need for exchanging currencies is global and constant. In order to conduct business in a foreign country, a company or an individual have to do it in the currency of the aforementioned country. You can’t, for example, pay for anything in euros in the U.S. or in dollars in Italy – you need to exchange currencies and this is what forex is all about. You do that with some help from your broker, but this is the subject of another article.

Forex Trading For Dummies | The Spot Market

Forex trade has three different subtypes of trading – the spot market, the futures market and the forwards market. The spot market is the most common one because it serves as a base for the other two markets and when one talks about forex trade, they most probably mean the spot market. So, what is this market all about? Well, in short it is about trading currencies between two parties according to the current price which represents the ratio of the two currencies in question. Party A gives party B a certain amount of one currency which has already been agreed upon and is reimbursed for that with a specified amount of another currency, depending on the exchange-rate value. The settlement is in cash and these trades usually take two days to reach it. Internet has helped this type of trading immensely by making it faster and simpler and it now stands at the very top of world’s trading industry.

Forex Trading For Dummies | Other Markets

The other two types of trading don’t deal with currencies directly, but instead focus on contracts which represent claims to a certain currencies at some point in the future. The parties signing these types of contracts agree on the price today but the transaction goes through days, months or even years later. The two types of trading are quite similar, with some differences in the way the trading is done. Future contracts, for example, mostly deal with currencies only and have an average length of approximately three months, while forward contracts may include other assets and have a much greater contract length. Futures also specify a standard amount of a currency to be exchanged when the settlement date arrives.

Forex Trading For Dummies | Conclusion

To put it simply, forex trading is trading with currencies. It has three subtypes (spot, forwards and futures) and is by far the largest market in the world. Ever since the internet started to improve our communication and enable us to get in touch with each other on a global scale, the popularity of this kind of trading is constantly on the rise. With time, it grew simpler and faster and today everyone can try to make money through it.

Forex Trading Strategies

When trying to make a profit on the forex market, traders often deploy certain strategies they believe will be successful. Of course, because of the size of the market and the sheer number of people who operate in it on daily basis, strategies used are practically countless. Yet, some of them have survived over time and are still often used today. They range from the very basic ones to the most complex ones which are meant to be used by seasoned traders and forex veterans. In this article, we will take a look at some of the more popular strategies. If you are still new to this business, we recommend this article.

Forex Trading Strategies | Basics

First and foremost, there is something called “support and resistance levels” trading strategy, one of the most basic, most efficient and most widespread strategies in the trading business. The philosophy behind it is that there is a certain price at which the trend will change its direction. These prices are called support (bottom level) and resistance (top level), respectively, and if a trader can deduce them, they can establish a range of prices of an asset. A variation of this strategy is called the Fibonacci Indicator strategy which tries to follow repeating support and resistance levels based as the market moves in waves. Ratios based on the principles of this Italian mathematician help predict the aforementioned levels.

Forex Trading Strategies | Indicators

Traders often use the so called indicators to help them determine how the prices will behave. The trades then base their decisions on the information provided by these indicators. ADX (Average Directional Index), for example, indicates the strength of a trend, but not its direction. The stronger the trend, the more probable it is that the same trend will continue and this is what the traders are looking for. One other type of indicators is the so called “candlestick” which reveals how the price has behaved in the past. In general, indicators push a trader in the right direction, but too many of them can be very confusing and cloud one’s judgment so it’s best to keep your chart neat and tidy.

Forex Trading Strategies | Other Strategies

There are many more strategies we still haven’t mentioned – head and shoulders (or the “shampoo” strategy) says that you should sell when you see a high peak between double peaks as the price is most likely going to drop after that; hedging strategy which focuses on diminishing losses at uncertain times etc. In any case, however, research is vital. You have to familiarize yourself with the strategy, know what to look for and be knowledgeable about the assets in question in order to make a good decision which will yield profit.

Forex trading strategies | Conclusion

With such a vast market as is that of the foreign exchange, strategies often come and go. Yet, some of them manage to survive because they prove to be profitable. We have covered some of them here, but there are also many others. The more time you invest to study them, the more tools you will have at your disposal when you find yourself in an opportunity to make money.