Forex Trading Guide - FX Trading for Dummies
97Forex 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.
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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.
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Trading Concepts and Mechanisms
Currency Pairs
Currency prices can only fluctuate relative to another currency, so they are always traded in pairs. Two of the most common currency pairs are the price for euros in US dollars EUR/USD and the price for the British pound in US dollars GBP/USD
Leverage
Most Forex brokers permit 100:1 leverage, some as much as 200:1, but also require that you have a certain amount of money in your account to protect against a critical loss point. A $100,000 position held in GBP/USD on 100:1 leverage means the trader has to put up $1,000 to control his position. However, in the event of a decline in value, Forex brokers do not allow traders to go negative. In order to make sure the trader does not lose more money than is held in the account, forex brokers employ automatic systems to close out positions should a client run out of margin (the amount of money in their account not tied to a position). If, for example, you have $2,000 in your account, and buy a $100,000 lot of EUR/USD, $1,000 of your $2,000 is tied up in margin, with $1,000 left to allow your position to fluctuate downward without being closed out.
An online trading platform will show three important numbers associated with your account: balance, equity, and margin remaining. If you have a $10,000 account and open one $100,000 position using 100:1 leverage, this has committed only $1,000 of your money plus you must maintain $1,000 in margin. While this leaves $9,000 free in your account, it is possible to lose it all if the position moves the wrong direction.
Commissions or Spreads
Brokers take part or all of the spread in all currency pairs traded. Here is an example:
EUR/USD. Prices are always quoted with both bid and offer prices ( Buy EUR/USD 1.2000, Sell EUR/USD 1.2003). That difference of 3 pips is the spread and can amount to a substantial amount of money. Because the standard lot is 100,000 units of the base currency, 3 pips on EUR/USD means $30 paid to the broker. A pip is the smallest amount the currency is traded in - 1/100th of a percent in the case of the US dollar. The currency pairs are always purchased by buying 100,000 of the quote currency , also known as the counter currency. For the pair EUR/USD, the base currency is USD, therefore 1/100th of a percent on a pair with USD as the base currency will always have a pip of $10. If, on the other hand, your currency has British Pounds as a base instead of US dollars, then 1/100th of a percent is now worth around $20, because you are buying 100,000 units of British pounds. Retail forex brokers make a lot of money without charging commissions.
Most Traded Currencies
1 United States dollar USD $
2 Eurozone euro EUR €
3 Japanese yen JPY ¥
4 British pound sterling GBP £
5 Swiss franc CHF Fr
6 Australian dollar AUD $
7 Canadian dollar CAD $
8 Swedish krona SEK kr
9 Hong Kong dollar HKD $
10 Norwegian krone NOK kr
Forex Trading Systems
There are more Forex Trading Systems , than fleas on a dog. Fibonacci analyses of market fluctuations, "Secret Trading Formulas," "Set and Forget," with automatic trades being done. No doubt some of these systems will work some of the time, but picking the jewels from the junk is not an easy matter. Caveat Emptor.
Author's note:
"If I had a foolproof way of making money on the foreign exchange market, I wouldn't be uploading videos to YouTube and trying to sell you an e-book, I would be sitting on my private beach in Aruba, playing the market and enjoying my money."
How to Start Trading Forex
Starting out trading forex is a very simple proposition: sign up with an online broker, download any software, deposit some money and you are ready to trade. Most of the reputable brokerage firms have a practice account facility where they will open an account, deposit fake money into the account and allow you to start trading in real time.
Some of these same brokers are also offering to open an account and start you trading for real using a very small deposit, say $100. Even with a 200:1 leverage applied, this amounts to only $20,000 - nowhere near enough to make a forex trade. My own feeling is that these "mini accounts," are a complete waste of time and money (see leverage) and possibly just plain dangerous. In the unlikely event that you do make money with a $100 deposit and are then tempted to place a larger one, anything you learned trading at this level will not apply to a substantially larger trade. Try a practice account with one of the larger banks instead. N.B Trading on a practice account, regardless of how realistic it is, is not the same as trading for real. If it doesn't matter whether you win or lose, you will behave differently to the way you will act when money is at stake.
Leverage in Forex Trading
Currency movements are measured in “pips” or fractions of a decimal point depending on the currency involved.
A typical example would be a currency pair like the GBP/USD. When this pair moves 50 pips from 1.9500 to 1.9550, that is just a $0.005 move of the exchange rate. With $100,000 invested, this equates to a profit or loss of $500. Therefore, currency transactions must be carried out in large amounts to take advantage of these small shifts. When you deal with a large amount of money, small changes in the price of the currency can result in significant profits or losses. Hence the leverage offered. A standard lot of this pair is 100,000. $1,000 invested and leveraged 100:1 would allow you to buy one standard lot. In this case, a 1% fluctuation will either double your investment or lose it.
Although brokers offer leverages of up to 200:1, it is not obligatory to use it. In this example, a $10,000 investment leveraged 10:1 instead of $1,000 leveraged 100:1 offers the same amount of profit/loss. A tenth of the profit compared to the amount invested, but a tenth of the risk.
- National Futures Association
"Off-exchange foreign currency trading carries a high level of risk and may not be suitable for all customers. The only funds that should ever be used to speculate in foreign currency trading, or any type of highly speculative investment, are funds t
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Risk vs Reward
Clearly, there are large amounts of money to be made trading foreign exchange. The forex market is a game in which there are many experienced, well-capitalized, professional traders who do nothing else but trade currencies full time. An inexperienced retail trader has a significant information disadvantage compared to these traders. Retail traders are undercapitalized. In a fair game - one with no information advantages - between two players that continues until one trader goes broke - the player with the lower amount of capital has a highest likelihood of going broke first. Since the retail trader is effectively playing against the market as a whole - which has an almost unlimited supply of capital - he will almost certainly go broke.
The retail trader always pays the bid/ask spread making his odds of winning lower. Additional costs may include margin interest, or if a spot position is kept open for more than one day the trade must be "resettled" each day, costing the full bid/ask spread every day. Even people running the trading shops warn clients against trying to time the market. "If 15% of day traders are profitable,' says Drew Niv, chief executive of FXCM, 'I'd be surprised." Source - Wall Street Journal
The retail brokers encourage individual traders to trade extremely large positions by offering high leverages, sometimes as high as 200:1. This increases the trading volume cleared by the broker, therfore his profits, but increases the risk that the trader will receive a margin call or a closed account. Professional currency dealers - banks, hedge funds et al, rarely use more than 10:1 leverage.
The US government regulating body for the Foreign Exchange Market the “National Futures Association” warns traders in a Forex Training presentation of the risk in trading currency. “As stated at the beginning of this program, off-exchange foreign currency trading carries a high level of risk and may not be suitable for all customers. The only funds that should ever be used to speculate in foreign currency trading, or any type of highly speculative investment, are funds that represent risk capital; in other words, funds you can afford to lose without affecting your financial situation.”
If it sounds too good to be true - It probably is
- The CTFC
The CTFC offers a full explanation of the risks and provides a guide to spotting forex fraud and a venue for reporting suspicious activity. - Quatloos
Quatloos is non-profit organization dedicated to the education of the general public regarding financial scams, including forex scams. Very well written information and specific warnings about scammers. - Forex Scams
Forex Scams
The forex market is largely unregulated and along with a substantial increase in retail trading, there has been a proportionate increase in scam artists, bent on parting a trader from his money. Forex, like any other investment, has the potential to lose money as well as make profit. The fast paced nature of the market and high leverage offered means that a $10,000 investment can be wiped out in a matter of seconds. The U.S Commodity Futures Trading Commision (CTFC) has witnessed a sharp rise in foreign currency trading scams in recent years and advises potential customers to be aware of the potential for fraud. Some claims to be wary of are these type. Anyone making statements like these, is probably best avoided:
- Whether the market moves up or down, in the currency market you will make a profit.
- Make $1,000 per week, every week.
- We are out-performing 90 percent of domestic investments.
- The main advantage of the forex markets is that there is no bear market. We guarantee you will make at least a 30-40 percent rate of return within two months.
- With a $10,000 deposit, the maximum you can lose is $200 to $250 per day.
- We promise to recover any losses you have.
- Your investment is secure.
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Conclusions
Forex trading is a high-risk, high-reward pastime. Fortunes are made and lost every time a currency changes value. The small investor is at a disadvantage compared to the major institutional banks for two major reasons: wider spreads and under-capitalisation. The consensus amongst the professional traders is that somewhere between 80 and 95% of day traders lose money and even the majors get in to trouble on occasion. In 2002, Allied Irish Banks revealed that it lost US$750 million at its Baltimore subsidiary on spot and forward forex trades made by forex trader John Rusnak and in 2003, the National Australia Bank admitted to losses of US$1.13 billion as a result of unauthorised forex trades, although it seems any time a bank loses money, it's a result of "unauthorised," activity.
Realistically, a private individual should only enter the forex market with a bare minimum of $10,000 "risk capital," i.e money that can be lost without causing hardship, and a good understanding of the mechanisms of the market. The nature of the forex market means that the smaller the sum risked, the greater the price fluctuation needs to be before a position becomes profitable. This doesn't mean it is not possible to make money trading foreign currencies, CitiGroup would not be interested if there wasn't an awful lot of money in forex trading, but it's not necessarily as easy as some would have you believe.
More Information on Investing
- Investing in Foreclosure Property
Bank Owned Properties & Foreclosures For Sale - Forex Trading Systems
Where to begin forex trading
There are now a large number of online brokerage houses offering trading facilities. This is by no means a complete list, but a good place to start.
CommentsLoading...
Hundreds - There are as many strategies as there are people selling you forex trading LOL and none of them will work for the small trader using high leverage - If you are considering this, I suggest no leverage, and look to the long term strategies.
At last. An 'Honest John' guide to forex trading. And, as you say, even the big guys get complacent or unlucky - the Vatican, Barings,... Superb hub.
Thank you. I hope you enjoyed reading it as well.
Many trader use Strategy candle stick ? How to use Candle stick system ?
An excellent hub Mark. If you saw my comment over at your make money online hub than you'll know that I'm new to this hub thing and I had no idea that a hub page could be this bright. You've certainly created a benchmark for my own creations.
Regards
Kevin
That was excellently written and really informative, I've bookmarked it and probably consider investing in forex soon :)
What do you think of sites like this? http://www.hyipinvestment.com/
It's a site reviewing hypes, a lot of whose are related to forex. I know I should be very careful investing (probably splitting the money across as many programs as possible), but the user reviews seem genuine...
No idea - I have never heard of them :)
but if you are considering investing in forex, you either didn't read my hub, or you alrady have a lot of money :)
I did read you hub :-P well most of it... ;) and I know there are lots of scams out there, but I'm still curious, especially considering the comments on that site (which apparently you didn't visit! ;)).
Oh and I definitely don't have a lot of money, I'm just a student. Would invest very small 'test' sums in many different programs -- some of those have a $15 minimum -- to pick the most lucrative and then invest on those :)
I did visit the site, but I really didn't spend enough time to give you a valued judgment.
As for investing small sums of money in forex trading - ABSOLUTELY NOT - send it to me instead LOL
Despite what many forex brokers are saying - it is NOT possible to make money with that level of investment. Anyone who tells you otherwise is a con artist. here is anithe hub I did on this: http://hubpages.com/hub/The-Best-Forex-Broker
Seriosusly - don't do it - I can explain in more detail if you like but No NO No LOl
Forex trading is a zero sum game - for one to win, another must lose.
There are lots of these review sites around - they are owned and populated by forex traders.
lol, thanks for the advice then :) will read your hub more in detail tomorrow, now I feel like I missed the most important parts :)
Great hub, very informative and well set out, I plan o create one for Futures trading, yours is a great example.
LOL - Love the spam - dum, dum, dum :)
Mark,
You are a riot!!! why don't you delete it?
I would rather make fun of them :)
And ~I flagged one of them - he will be gone soon. LOL
Mark, I am not sure if you have noticed this, but the comment box includes a field for a URL, inviting commentors to leave a link, if you don't want links why ask for them?
BTW why have you written a page about Forex if you have no interest and believe that it is a fool's game? Surely this goes against your desire not to add to the 'garbage' of the net.
Why? Telling people the truth about forex trading is not adding garbage to the net is it? Should I only write about it if I want to sell people on the idea of forex trading when I know they will almost certainly lose their money. There are any number of people doing that already - mostly forex brokers :)
I don't understand your thinking here. Please explain.
As for the comment box - I have no control over how that works, but I do want genuine people to be able to leave a comment so.....
Mark, I would delete the second half of my last comment if I could, I was just feeling a bit knarked. I don't like to be accused of spamming, but I can see your point.
I am a futures trader and started on the floor of LIFFE. I do agree that Forex trading (like Spread Betting) is a losing proposition for the average person because the cost to trade, i.e. the spread, is very high. In the futures markets a trader can join the bid or offer and hence avoid the spread.
Ok - No problem. Were you feeling knarked at me?
Well not really, being knarked is a self-induced state.
LOL - I guess so. Although I am not 100% sure. LOL
Mark,
This is very detailed and well presented. An incredible accomplishment, indeed!
Thanks Terence :)
Hey Mark -- despite what you said here, I can actually tell you of a broker it's safe to invest in even with just $100 or $10. I'm not an affiliate, they don't even have an affiliate program to keep spreads lower ;). I say you can start with as low as you want with them because you trade $10,000 lots (on mini accounts), BUT decide exactly which fraction of a lot you want to trade, even just 1/10,000 of it (a single unit)! Now, isn't that something cool? I can risk $0.01 per PIP or less if I wanted to ;).
Outspan - No it is not cool. You are going to lose your money. I guess there will always be people who do not understand that. I am not going to repeat what I said in the hub, but please re-read it to find out why you cannot make money.
wow, thanks for this article, I am fairly new at all this stuff, and most of what I see resembles the scams that you warn about. I WAS interested in foex, but I will think twice after reading this :)
Thank you very much for your article Mark.
It is rich and seem to withhold nothing;concentrating on what is most important that it became a research material for me.I am going to trade. thanks Mark Knowles.
Mark - I'm new to Hub Pages and hoped you could tell me how to edit the layout. How do you make your videos smaller and use columns? Also how do you use the blue shaded boxes? My hub is just one column of text and huge video boxes!
Nice hub. Got a lot of tips from here.
Great work on your hub. I would like to add that I make a lot of money on the forex market. I just stick to a few strategies. But by no means is it get rich quick. It takes a lot of patience.
Ryan - you are full of shit. If you were making a lot of money trading forex, you would not be pissing about trying to make a few bucks referring people with affiliate links :)
You would be making even more money trading forex LOL
Unless your idea of a lot of money is different to mine.
I have never traded forex before. but i had $500 to throw away. SO, on 3/17/09 I bought EUR/USD worth $250 and sved 50% for margin. Next day, EUR/USD went from 1.30 t0 1.36. I made $5,000 and change. I cashed out and closed the account.
beginners luck maybe., but as long as I dont go back, i have the 5K for myself.... :-)
This is the kind of quality I would have expected from a Hub of yours Mark. Irrespective of the choice of content, or anyone's views on Forex, it is an education in Hub creation.
Thanks - and yours is the only forex-related comment I have not deleted. The rest of them seem to think leaving a spam comment like "thank fur gud info" is worth doing. :)
I'm spanish and my english... Normally I use to post things like "good information, thanks", but in this case... I have been reading your hubs and I think that you are sharing very good information, really. And yes... I'm not doing a lot of money with Forex, so I have some links in my hubs... ;)
Thank you so much for this very insightful, detailed article. I just started Forex trading 2 weeks ago, and the information you provided is much appreciated.
Nice work....being an ex-trader myself I know how difficult explaining to a layman is. Philip
G'morning Sir, thanks for the article. I have traded Forex for some years now, with success I am glad to say. There are so many scams out there now though, it is important that people know what to avoid.
Have a great day:)
Forex and Spreadbetting are two things that I will never 'invest' in. It is effectively a bookmakers for the middle classes. People will always find ways to profit from greed, so give me my long term FTSE investments any day.
It is a mug's game Ryan. You can -and I do - make money on the longer term trades - but 400:1 leverage and 10K invested is a guaranteed loser.
Great info Mark. I have made some $$ on Adsense in the Forex world, but never took the dive to actually get involved in trading. With all this info, I feel more confident to move forward.
Thanks again.
Cliff
Great information - thanks!
Fantastic and complete guide,
good resources too.
thank you.
Very nicely put together, I mainly do Forex its more predictable.
Go well
This was a great piece of work Mark, am just getting started with forex trading and really learning alot. I have lost my first deposit plus profit I made in two weeks because of lack of discipline. About the indicators I much like The Moving Avarage, MACD and Stochastics for my trades. Am still learning and would risks some dollars on micro account with small leverage to expand my trading skills.
Mark Very well said.
My best advise for any one iterested it trading FOREX
is to go to www.babypips.com
and start out with DEMO account,which is FREE and start trading,which is not the same as real hard earned money...
www.fxdd.com is a good place to start Demo..
Please don't try to trade with real money until you are aware of the risks involved!
Forex Trading is not for the faint hearted, and you should treat it like gambling, don't gamble with money unless you can afford to do without it. That said, we all want to make a buck in this world. Learn about it before doing it. Good Hub!
nice hub.only the discipline trader can make profit,people mistake forex trade for a get rich quick scheme.
I didn't realize that governments can actually be involved in forex trading in the sense that they buy and sell their produce to other countries. This is a macro-perspective and they affect prices. As for the online forex traders like me, I'm always reading tutorials, and guides like this one to help me get through my Etoro forex trading.
thanks for share but specially for newbies it do not help a bit
hey good hub. guess what? i reached here thru ur..
Cheeky Girl says:
Forex Trading is not for the faint hearted, and you should treat it like gambling, don't gamble with money unless you can afford to do without it. That said, we all want to make a buck in this world. Learn about it before doing it. Good Hub!
well i completely agree with it.I have taken the knowledge from www.forextrendalerts.com
Try to find a good site for taking the knowledge.
Forex trading is not gambling. Joe Atkins a.k.a Forex Joe is a Texan sports bettor who made a fortune betting with his mathematical formulas. Joe Atkins had his own radio talk show as well. Some years back, he applied those same proprietary mathematical formulas to the currency market and lo and behold,he made millions here again. You can read more about Joe Atkins on one of my hubs: Forex Mastery and the M3 Forex Navigator Software. If you want to learn forex trading than I think he is the best person to teach you how to trade forex!
Hass - you are a liar - do you really think anyone will fall for that garbage?
"I have done Masters from Harvard University. I am good at sports and outdoors."
LOLOLOL
Good advice with lots of info I used to trade Forex but lost everything when the economy collapsed (never used stop losses)big mistake of mine. Thanks Mark
While there are certainly scams in Forex trading opportunities, Madoff, AIG, etc. have shown that regulation doesn't provide as much protection as real due diligence. Unlike etfs or common stocks, prices move because of actual commerce.
Thank for the heads up! Indeed, a lot of scams on the Forex market especially in the internet. I wished there were some sort of a systematic control center to regulate all these transactions to make sure these are fool proof transactions.
Good intro to Forex. It is a risky business. However, those that have studied this market for many years will manage to make some good cash. Making money in Forex is not a Loch Ness monster that everybody has heard of but nobody has really seen it.
Great information. I have started considering trading in currencies but did not have the least bit idea of how it worked. This is a a great overview of Forex trading. Hopefully I will put this knowledge of how it work to use.
Great info. I had no idea how Forex trading worked. You explained it very well.. thank you.
I have been in Forex for about 5 years and I think you touched on everything vital for a newbie. One piece if advice I always give is most companies will let you setup a test account. Like playing with fake money. Its a great way to learn.
Reading yr hub has made me wary of forex traders and forex trading! Thanks for the tips on what to look out for .. and with the money I am thinking of investing forex trade is definitely not the thing for me. Knew quite a bit abt stock trading and after reading yr hub I think forex trading is not entirely greek to me any more.
Thanks and great hub sharing about forex here. Well done. Hope to see more forex trading article from you.
I am using ZuluTrade which is a free service and has a huge
selection of traders (signal providers) for you to choose from whom can automatically trigger and close trades for your in your account even when you are not online.
In my ZuluTrade 30 day demo account I tested the signal provider
known as "Fly On The Wall" whom exclusively trades GBP/JPY.
After signing up for the demo, I chose the signal provider (Fly On The Wall) to start trading in it. I then logged out of my ZuluTrade account and I did not check it again until 21 days later (I forgot about it since I was doing so much Forex research on the internet, jumping from system to system, broker to brokwer, robot to robot.)
The 21 days later I thought "maybe I will return to my ZuluTrade account and researtch it in more detail this time".
So when I logged into my ZuluTrade demo account 21 days later, to my surprise "Fly On The Wall" had accumulated almost $4000 in my demo account, and did not have one losing trade (my demo account went from a starting amount of $50,000 to almost $54,000 in 21 days thanks to "Fly On The Wall's" signals.)
When you want your ZuluTrade account to go live you need to chose
one of their selected brokers.
I opened a live account via AAAFX since AAAFX is directly integrated with ZuluTrade (unlike some of the other brokers) and Fly On The Wall also uses AAAFX.
I am starting with a small deposit ($1500) and with micro lots (10
cents per pip), as well as $1 per pip, for testing purposes.
So far after 2 trades Fly On The Wall has produced over 30 pips for me (in two days). And this is with my live account (had I chosen $10 per pip I would have had about $300 already).
I have my ZuluTrade settings set so no more then two trades can be
opened at the same time.
I can only afford a small deposit. But if I can eventually get a
larger deposit I will be keeping Fly On The Wall trading for me
using $10 per pip. This will produce a $4000 - $5000 month income
for me if Fly On The Wall is consistent.
But $10 a pip is risky for the low deposit I have right now.
AnywaY if you go with ZuluTrade you need to look at the "Performance" tab and carefully study the signal providers stats. Some will have a 100% wins, but may have only been trading for a week. Others have been around awhile, and may have a low drawdown which is good. Some might have -5000 pips currently only because they are millionairs or even billionairs, and have multiple trades going which dip low without getting margin called, and perhaps weeks or months later finally end up in positive pips.
So you need to choose what works best for your budget. You can
adjust your settings so you only allow one trade to be opened at a
time, and you can adjust your lot size and the stop loss on your own etc. Or you can automatically use the signal providers stop loss, take profit (keep in mind they might have a stop loss that could wipe out your account if it were to go that low.)
"Fly On The Wall" seems like a good signal provider if you are looking for someone with comnsistent, small wins that accumulate over time. And it is up to you if you want Fly On The Wall to trade 10 cents per pip, $1 per pip, $10 per pip, $100 per pip, $1000 per pip.....But you need the budget to back it up so you are not margin called and lose money only after a few - pips in the wrong direction. (No, I am not Fly On The Wall. If you look at the performance stats you will see that Fly On The Wall has a dozen or so ZuluTrade usernames and has billionbs of dollers. Most of his trades are successful, but you need to do research.
Its a great article that you have here Mark.
Trading forex is really a risk and you have covered everything important and reading your article would be a great start for newbies who wants to trade forex,
Ror people who are really interested trading in forex I would suggest that they open up a practice account and trade on simulated funds, a demo account can offer that to newbie traders and actually get them familiar with the system at no risk, plus a demo account will be as good as the Live trading account because a demo account would be using the same live feeds that a live account has, that would be direct from a liquidity provider, only the demo account would not be using actual funds, that will be one of the best way to get familiar with the system and a great way to learn,
Oh man, I have posted the same thing twice, sorry for that If you could delete my first comment that would be great..
Thanks
Great info. I had no idea how Forex trading worked. You explained it very well.. thank you.
You made a couple of great points and a few that I didn't agree with. I have been researching and writing on the topic for a few months now and intend to post some of my work soon. The Forex has long trend lines that can often run months on end in a given direction. The risk is taken on by one person who buys the position while on the other end someone more risk adverse sells their position because they want to get out at that point. Furthermore because of the size of the Forex, I don't believe in market manipulation. It is far to risky and difficult for anyone to manipulate a market of that magnitude. Someone could clearly just step in and take advantage of the arbitrage opportunity if you try to manipulate the price.
A really nice article which contains so much useful information. A don't intend to try my hand on forex trading for now, though. Cheers!
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Since you are providing a lot of good information and projecting it in an objective light, do you have an indication by now. how much Google and your other ad sources are producing on revenue for you with this Hub?
very much information about forex that I get from you, I hope I can jump into the forex world better, thank you
a very good heads up on avoiding the forex scams out there
wow. believe me. this is good information about Forex!
you summarized loads of information into this article, very good. short yet concise.
Very informative forex Hub for beginners. Thanks! Voted up!
Thanks for the great information for beginners.
Additionally, I'd be careful of things like Zulu trade. Personally, I would rather be a trader on the site, than be dependent on someone else with my capital. Realize that there very well could be some good traders on that site. However, there are also a lot of traders there that trade with unlimited risk exposure, (no stop losses). They appear to make a lot of money. They look incredible. However, eventually, it is likely to cost them their accounts as well as the accounts of those that follow them.
Hello,
Very good resume about the foreign exchange market! It is truly hard to trade on the FOREX if you are unprepared. I still think that it's an interesting market and that it can be used to cover a position or even just to make some gains if you know how to properly trade currencies.
Once again, good job on the article! I think it does introduce the FOREX well. If anyone is interested by this vast market, please feel free to read some more articles on this subject on www.forexonlineguide.net
Sincerely,
Marco
Thanks very much for a very accessible and informative introduction to trading the currencies market.
I'd suggest that anyone interested on opening a forex brokerage account be sure to go with a non-dealing desk broker that offers ECN/STP access. And read the fine print as many will claim to be ECN brokers when they actually are dealing desks.
Thanks again!
@ Mark
I agree with most of what you are saying, however, I do think it is a good idea to start trading Forex with a small account first.
I wouldn't recommend trading live, until you've demo or paper traded SUCCESSFULLY for at least 3 months. Meaning you have been net profitable with your trading system for three months first.
That being said, you never truly learn to trade until you've got real money on the line. It doesn't hurt to start live trading with a relatively small account first.
That way, if you buckle under the pressure of live trading and blow out your account, you haven't lost $1,000s.
Or maybe you have. Again, I said relatively small. Nice hub, BTW! Really enjoyed it.
Traders with big capital don't use leverage to open a position, plus they are great analyst and they follow the mean trend. Even if the market goes against them, it always fixes itself back and they get back in the winning position.
So, the small traders want to be rich in one night, so they use high leverage. I do consider anything above 10 to 1 is high leverage and can blow up the account sooner than later.
Forex mouvements are less than 1% a day above or below the previous day, unfotunately, traders lose their money b/c of lack of direction, or they go long and short many times a day that they lose lots of percentage in the same day.
There are no secret in forex other than respecting leverage. If you use your own money 100% without leverging them, there is no way you can blow up your account except if you have no understanding of trend and retracement.
This is what I learned in my last 4 years of trading. I settle down with 5 to 1 leverage max with one direction of the main trend using trend lines and I don't go against the trend, I wait for it to stop retracing and then get back in the direction of the maine trend. even if the market goes against me for while, it always comeback, but of course there is a limit if it happened that the main trend had reversed.
Best luck to you all.
blerim 4 years ago
How many kinds of main strategies are there in FOREX trading?