.
A useful trick to prevent giving back profits during a successful trade
something traders have all been guilty of is to ask oneself where I
would enter a new trade if I were not in a trade right now. I should
also use stop losses to protect profits. This should help to
prevent that terrible result of finding yourself doing well on a trade
one minute, only to lose it all back the next. You need to be
accountable for your trades; if the trade does not do what was
initially expected for whatever reason, you need to be flexible to
adapt to the market.
It does take courage to be accountable because full accountability is not
always the most popular choice; when you are trading, that is the only
condition a trader must take. It's much more powerful to focus your
trading plan and the desired results in order to have the energy and
strength to work for you and make a winning trade.
A managed forex account can also open up investors to the
threat of scam, incompetence, and bad brokers. You will still want to
see the brokers performance over an extended period, and to discuss
risk management and their commission charges first. Some traders are
capable of amazing returns 80% of the time. Can your forex broker
compare to that.
Does the forex broker provide a demo version for testing, or have
a live demo running where everyone can see the trades or statement.
Check on their margin requirements if you fall below a certain amount
in your account . Check to see if they are regulated both government
and private. Do they offer free deposits and withdrawals most offer
free deposits but some charge for withdrawals.
If you have enough money, try to open a small live account
with several brokers. Then test them against each other. Watch the
spreads during news times drawdown or slippage. Some brokers work
better for some day trading styles. Other FX brokers work better with
other longer term trading styles.
Check their about pages and see how long they have been in business,
there are some who are not reputable and can take you money.
Cash (Spot) Forex markets
They have no Central Exchange
This means that the market you're trading is the market your broker is
making for you. This can lead to some minor manipulation at times.
There is a reason you hardly see volume in Spot Forex. It is because
the real volume is very different than the "trillion dollar" volume
you read about in all the marketing.
They are Non–Regulated
Slowly but surely, the Spot Forex market is being regulated more and
more. It is still one of the least regulated markets around which
really can lead to manipulation and risk for average retail clients.
Most importantly, if you run into a problem with your account, you
really have little to no recourse as there is no regulating body that
100% regulates the Forex markets as much as other markets.
Broker May Trade Against Client some brokers do this
Most but not all Forex brokers don't charge any commissions or fees.
Instead, they get paid on the "spread." What they do is constantly
make a spread that ensures they will profit from your trades. When you
push the button to buy or sell, they or a partner are typically on the
other side of your trade. This means that your goals and their goals
may not be in alignment as you are essentially trading against each
other.
Counterparty Risk
When you are trading a semi-non-regulated market, you have to make
sure you know exactly where your account is actually being held. Is it
being held at a large bank or some account that the broker has rights
to? There have been some disaster stories such as Refco not long ago
and others that come to mind. Make sure you know where your account is
being held and how safe it is.
No Commissions brokers use a spread
You will see marketing for the Spot Forex market that suggests "free
trading" If you believe that, I have some beautiful land in the desert
for sale with a huge lake in the backyard and plenty of green grass,
Anyway, most but not all Spot Forex brokers don't charge commission,
they instead widen the spread in the real market, offer that
artificially wide spread to you and get paid on the spread. Typically,
a spread in a major pair might be 2-3 pips but can easily go as wide
as 5–10 pips at times. At $10 a pip for most, this can mean that you
are paying $20 - $30 to get into the trade. At that rate, commissions
would be very cheap so don't be fooled when you see the "no
commission" trading marketing material.
Big Leverage
In Spot Forex, 200:1 leverage is not uncommon. You can open an account
with as little as $500 dollars and begin trading. That is not ideal,
but it can be done. Don't forget, leverage can work for you and
against you, so be careful and don't abuse it.
Large Trends on a daily bases especially if there is news
The Forex market experiences large moves almost daily. There is always
a currency pair trending strongly which means very frequent trading
opportunity.
Forex Futures Trading Information
One Central Exchange CME or another major exchange
The Chicago Mercantile Exchange (CME) is the home of the Forex
Futures. The CME is one of the largest exchanges in the world and is
very well capitalized. Some of the largest Banks use the CME Forex
Futures to hedge currency risk. I actually began my trading career on
the Currency floor of the CME and understand the power of a central
exchange.
Transparent Volume and Charts
Because there is a central exchange, we can see trading volume and
open interest easily and everyone has access to it.
Very Regulated SEC, NFA
The CME actually has double regulation. They are a futures exchange so
they are under the watchful eye of the NFA and the SEC. They are also
a publicly traded company so they have another level of regulation
that comes with that structure.
Trades Matched on the Globex system
As with other Futures markets, the Forex Futures are traded in the
trading pit but also on the Globex system. The Globex system is an
electronic order matching system much like NASDAQ for stocks. There is
no broker on the other side of your trade. Instead, when you buy, your
order is matched up with a seller like you, not a broker. This leads
to a more balanced and free market for the retail trader. |
