Best Ways to Invest in Forex Market with Little Money

Posted by Deb | Forex,Guest Post | Thursday 25 October 2012 2:42 am

In the present day scenario every banker and cooperate agencies provide 24/7 marketing facilities in trading currencies. FOREX market is more flexible with online access but is a risky job, yet many prefer it because investors with very little money can intend to gain larger profits.

• Choose the best way to invest your money: FOREX is a biggest financing market which took over even the US stock market by making a turnover of 4 trillion dollars each day.

• Contact with a reliable broker: As FOREX possesses many terms and conditions, check whether the chosen trader follows the rules and regulations or not. To do so, you can log on any governments sites and enter your broker’s name to get their complete details.

• Software: Install software’s such as Metatrader 4 which provides the complete view of current prices and gives alerts on technical analysis.

• Educational financial institutes: Search for best networking websites to enhance the knowledge on trading market along with basics statistics and free guidelines on traders and trading styles.

Tips while investing in FOREX market:

• If you are new to this create a mini FOREX trading account initially

• Take advice from the traders who are already into this market.

• Track the currency fluctuations in market in areas such as GOLD, OIL and STOCK markets

• Make a point to be stick only one pair of currency whereas most common pairs are listed as USD/JPY and EUR/USD

• Undergo various money management steps to increase profits and reduce bigger losses

• Try to invest only 80% of your money on stocks market. For instant you are holding £1000 and invested in stocks, if there is a sudden fall of price to $0 then the complete amount invested will be lost. So as in FOREX you can lose more than invested, hence make a point to invest only 80% of money

• Make multiple transactions instead of one big transaction

• Look out for the dealers controlled by the law and avoid fraudsters

• In FOREX you have an option to withdraw or cancel your order if you’re unable to manage funds for your chosen pair of currencies.

• Try investing in safer deals and make sure to maintain a track all your expenses while undergoing huge profits or loss. To overcome from such sudden crises you can make use of same day cash loans which can be get approved for any emergency with minimal processing time and higher interest rates. These are short term loans in order to get instant cash which can be repaid by their next pay cheque.

Therefore as mentioned above FOREX is a risky investment market where you can intend to lose your earned cash and fall into financial crises but with proper research and good management you can reap profits. Hence ensure to take safer steps to gain revenues and double your invested money.

About the Author:
The guest post was contributed by Alicia, financial guest blogger from Manchester, UK. Find out more about her finance related blogs @financeport

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Forex Trading Tips for the Beginning Trader

Posted by Deb | Forex | Friday 19 October 2012 12:15 am

Although my trading experience is mainly in futures, I have been recently looking also into Forex trading. One advantage of trading in Forex is that you can start from a relatively small account, and do your first steps in a low-risk manner, trading with small amounts.

Following are few tips I have gathered while learning how to trade on Forex. Most of these tips really apply to all types of financial trading, with their specific twists for Forex trading:

  1. Risk Management: This is one of the most important rules in any trading. Similar to what I have written about risk management in futures trading, in Forex trading you should also always decide in advance how much money you are prepared to risk. Don’t enter a position before knowing this figure in advance, and don’t let your position go further than your risk level.
  2. Know your goals and limits: Be honest with yourself and define how much you expect to make from trading: Is this for you a part-time hobby, or a serious profession? Do you expect to gain a weekly allowance or do you see your trading as something which eventually will let you quit your day job? Know you limits: Don’t get greedy. Don’t let yourself fall into losing all your money in a losing position. Control your ego: don’t add to losing positions.
  3. Don’t spread your trading on too many currency pairs. Start by educating yourself on one pair, and then add a few more. Each currency pair has its own behavior, speed and characteristics. Start with one pair, and only when you feel you understand it well and have enough experience and skills you can move on to another one.
  4. Start small: Begin your Forex career with demo practice. Practice until you feel sure enough to try the real thing. Start your real trading with small amounts and minimum leverage.
  5. Remember: as an individual trader you will never have the inside information or the influence of big corporate Forex traders. Your trading will always be speculative. If you acquire good trading habits, statistically most of your positions will succeed, but you will have to accept that sometimes you will lose.

Good luck in your trading!

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Scalping Forex Brokers

Posted by Deb | Forex,Guest Post | Wednesday 17 October 2012 7:04 pm


The term scalping is referred to a trading style which consists of executing many single trades with the sole purpose of making small profits for a short period of time. Usually, forex brokers do not welcome this type of trading because they are not able to hedge this exposure elsewhere. By accepting the risk against scalpers forex brokers simply lose money. However there are a handful of brokers which easily accept this trading style because they have a large pool of orders and can manage the risk properly. These brokers are classified as scalping forex brokers and are highly valued by forex traders.

After you read this article let me know was it interesting for you and how it contributed to your trading knowledge?

What is Scalping?

Many traders, especially beginners rely on this trading style because they see quick and easy profits in it. However, once identified as a scalper you will hardly get a good execution.

The reason is that forex brokers usually don’t welcome scalpers. Although they will accept you as a client, sooner or later you will experience significant difference in the execution. To trade with this method you certainly need an automatic trading robot.

The most well known trading platform in the world offers the opportunity of using such robots, they are called expert advisors. By using such program you eliminate the risk of emotions trading and also human mistake. The robot executes trades regardless of the result. It always follows the rules.

For example you can set a fixed + 3pips take profit rule and -1 pips loss. It is clear that one of three trades must be successful in order to don’t lose money (if you trade with the same quantity). You can ask a developer to write this algorithm for you but remember that what I just offered is an example and is not in any way a recommendation of a trading strategy. You should create your own scalping strategy which is based on facts and technical analysis.

Is scalping profitable?

This question is exactly the same as the question: “What is first: the egg or the goose?” Nobody can say 100% if a certain strategy is profitable because of few important factors:

Markets change

The only thing you can sure of is that nothing is sure. While your scalping trading strategy might work today, tomorrow the market will react in a completely different way because of major economic events or clearly because of market sentiment. That is why every strategy, no matter scalping or long term, cannot be relied on for a long time. You have to adjust it all the time when this is needed.

Scalping is stressful

The more trades you make the more is the stress and the frustration of the unprofitable ones. This can create inconsistent stykle of trading and can ruin your trading career. The easiest way to end it up is to wipe out your account in a single trade with not well managed risk. That is why scalping requires high level of discipline and excellent knowledge of the trading platform you are operating with. However, if you manage to trade with a scalping strategy it means that you already mastered the forex trading.

How to find a scalping broker

Brokers do not state they accept or reject scalping. There is no way to see such brokers classified in official reviews site, neither you will receive a “yes” or “no” answer from their customer support. Instead, you should read forum threads and share opinion with people who experienced a real live account execution over the time.

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Currenex Brokers – are they true ECN?

Posted by Deb | Forex,Guest Post | Wednesday 10 October 2012 9:28 pm

The concept of ECN trading has been widely discussed over the last years. There are so many traders who put the conflict of interest question at a discussion that many brokers started to apply the ECN model. But what is the ECN actually? Many traders do not understand this concept and accept all that the brokers tell them. One of the most famous ECN platforms is Currenex and there are a handful of Currenex Forex brokers that might proudly call themselves ECNs.

After you read this article tell me how it contributed to your trading experience. Was it useful for you and will you recommend it to a friend?

Trading on the Forex Market is certainly not an easy task and everyone should carefully understand the models of trading to choose the best for his or her trading style. Let’s see the most widely used trading models.

ECN Forex Trading

ECN stands for electronic communication network and it plays the role of a place where buyers and sellers meet to execute their orders. An ECN comprises of an order book with two opposite sides of the deal – buyer and seller. On each side buyer and sellers place their offerings with quantity and price. It actually looks like an auction but of course everything happens quickly and is managed by automated systems.

The best advantage of this model is the high level of transparency. The Currenex platform, for instance, shows each counterparty name and quantity. Like this you can see with whom you are going to execute the order. The spread is narrowed down to 0.4-0.5 pips depending on the current liquidity – that is to say how many orders are taken in a certain moment.

For example the most traded currency pair EUR/USD can produce a spread on 0.2 pips because there are so many counterparties that currently place an order for EUR/USD. However, the ECN execution is ensured by a provider and it also has to earn some fee for that service. So Currenex brokers usually charge a fixed fee in the form of % of the executed volume. In this case the total spread you might be required to pay will be around 0.6-0.7 pips but it still will save you a lot of costs since the usual target spread of dealing desk brokers is 1.5 pips.

Market Makers

As opposed to ECNs, Market Makers do not offer this level of transparency by simply giving you a quote coming from them. They do not combine many counterparties but narrow down the process to two counterparties – you and the broker. Thus there is a conflict of interest between you and your broker because each losing trade will be a winning one for it and vice versa. However, there is a widely spread misunderstanding that each losing trade of yours ends up in your broker’s pocket. Actually brokers net all clients positions into a single position and then what is left is being hedged fully or partially. In this sense we can conclude that everybody in the market is a market maker even you. If you have a long position on EUR/USD you might hedge it by betting against your friend. The main point is that it is your decision whether to hedge or not.

Which model is the best?

There is no such thing as best trading model. The most important factor is and always be the broker execution no matter if it is a market maker or ECN. Just choose the broker that fits your trading style and that is how you will be successful in the market. Also you should be advised that demo trading is not in any way the same as live. During your journey towards trading perfection you will find out that many obstacles will arise especially during news releases and major economic events. The trading model itself will not help you to be more successful but will help you to understand the mechanism behind trading.


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What are ECN Forex Brokers?

Posted by Deb | Forex,Guest Post | Tuesday 21 August 2012 1:31 am

The concept of ECN forex trading has become widely popular during the last few years. Most of the brokers advertise they are ECN, but are they really? And what exactly means ECN? I will try to answer these questions and explain the nature of ECN trading in Forex in the next lines.

After you read this article please tell me if it was useful to you and how it contributed to your trading experience.

There is a wide range of ECN forex brokers offering a variety of trading instruments. By definition ECN means electronic communication network. To understand the nature of ECN execution I will have to briefly explain the main models of execution: Market Maker, ECN and STP.

ECN Forex Brokers

Market Makers

The market makers are usually large institutions and banks who literally make the market by taking the risk against its counterparties. Say, a major US bank want to purchase few millions of dollars from a EU bank will create risk for both the counterparties if the EUR/USD rate goes in a certain direction. The EU bank will play the role of Market Maker because it takes the risk against its counterparty. Although, you will find similar definitions of “market making” over the Internet, small forex brokers can also be market maker for their retail clients. Instead of two large banks, let’s now have two counterparties – the small forex broker and its clients. Suppose today 100 clients bought and sold different quantities of EUR/USD. The broker will simply combine all of that and net the overall client position. After that it will receive for example long 15 million against its clients. Now the broker can decide whether and how to hedge its exposure against the clients. It might be also taking the entire risk in EUR/USD if it has already hedged exposure in another instrument which is highly correlated with EUR/USD. In this sense we can say that everybody is market maker, even each individual client because each of us takes the risk against its counterparty.

STP

STP stands for straight through processing and in means direct transfer of each order to other counterparty. If a forex broker claims that it is STP, each of your orders should be routed to another counterparty which acts as a liquidity provider to the STP broker. In this case the broker and you do not have a conflict of interest arisen from the opposite direction of your positions. However, I might argue that because the broker interest is you to execute the trade regardless of whether it will win or lose. Somehow, this constitutes a conflict of interest because the broker has the opportunity to generate profit from spreads and commissions without caring what your result is.

ECN

ECN trading almost mimics the stock exchange trading style. It offers you a trading book with all the best orders listed from both the buy and sell side. In this case all the counterparties compete to provide the best price for the quantity they offer. Thus the spread is formed by making the difference between the best bid and ask offers and sometimes is narrowed down to 0.4-0.3 pips. Of course, commissions apply for this type of execution and the real price of a trade would be 0.7-0.8 pips. As with STP, the ECN trading does not imply a direct conflict of interest between you and your broker, however slippage and re-quotes might occur due to the fact that your broker gets it from its counterparties.

Is the ECN model the best?

It might be said that pretty much ECN would be the most transparent model of all. However, there are pros and cons for each model. For example a large liquidity provider – market maker might provide absolutely sharp execution due to its high volumes available in its client pool. However, the trading costs might be quite high due to the fact that fixed or variable spread is paid each time regardless of the current liquidity.

All in all there is not a best model but rather a best broker for your trading style. If you find a good broker with instant and fair execution you might not care what is the trading model applied.

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