Learn Forex Trading Articles
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There are many different advantages
to trading forex instead of futures or stocks, such as:
1. Lower Margin
Just like futures and stock
speculation, a forex trader has the ability to control a large
amount of the currency basically by putting up a small amount of
margin. However, the margin requirements that are needed for trading
futures are usually around 5% of the full value of the holding, or
50% of the total value of the stocks, the margin requirements for
forex is about 1%. For example, margin required to trade foreign
exchange is $1000 for every $100,000. What this means is that
trading forex, a currency traders money can play with 5-times as
much value of product as a futures traders, or 50 times more than a
stock traders. When you are trading on margin, this can be a very
profitable way to create an investment strategy, but its important
that you take the time to understand the risks that are involved as
well. You should make sure that you fully understand how your margin
account is going to work. You will want to be sure that you read the
margin agreement between you and your clearing firm. You will also
want to talk to your account representative if you have any
The positions that you have in your account could
be partially or completely liquidated on the chance that the
available margin in your account falls below a predetermined amount.
You may not actually get a margin call before your positions are
liquidated. Because of this, you should monitor your margin balance
on a regular basis and utilize stop-loss orders on every open
position to limit downside risk.
2. No Commission and No
When you trade in futures, you have to pay
exchange and brokerage fees. Trading forex has the advantage of
being commission free. This is far better for you. Currency trading
is a worldwide inter-bank market that lets buyers to be matched with
sellers in an instant.
Even though you do not have to pay a
commission charge to a broker to match the buyer up with the seller,
the spread is usually larger than it is when you are trading
futures. For example, if you were trading a Japanese Yen/US Dollar
pair, forex trade would have about a 3 point spread (worth $30).
Trading a JY futures trade would most likely have a spread of 1
point (worth $10) but you would also be charged the brokers
commission on top of that. This price could be as low as $10
in-and-out for self-directed online trading, or as high as $50 for
full-service trading. It is however, all inclusive pricing though.
You are going to have to compare both online forex and your specific
futures commission charge to see which commission is the greater
3. Limited Risk and Guaranteed Stops
When you are trading futures, your risk can be unlimited.
For example, if you thought that the prices for Live Cattle were
going to continue their upward trend in December 2003, just before
the discovery of Mad Cow Disease found in US cattle. The price for
it after that fell dramatically, which moved the limit down several
days in a row. You would not have been able to leave your position
and this could have wiped out the entire equity in your account as a
result. As the price just kept on falling, you would have been
obligated to find even more money to make up the deficit in your
4. Rollover of Positions
futures contracts expire, you have to plan ahead if you are going to
rollover your trades. Forex positions expire every two days and you
need to rollover each trade just so that you can stay in your
5. 24-Hour Marketplace
futures, you are generally limited to trading only during the few
hours that each market is open in any one day. If a major news story
breaks out when the markets are closed, you will not have a way of
getting out of it until the market reopens, which could be many
hours away. Forex, on the other hand, is a 24/5 market. The day
begins in New York, and follows the sun around the globe through
Europe, Asia, Australia and back to the US again. You can trade any
time you like Monday-Friday.
6. Free market place
Foreign exchange is perhaps the largest market in the world
with an average daily volume of US$1.4 trillion. That is 46 times as
large as all the futures markets put together! With the huge number
of people trading forex around the globe, it is very hard for even
governments to control the price of their own
So what is Forex trading you may ask?
Forex is the exchange you can buy and sell currencies. For example,
you might buy British pounds (by exchanging them to the dollars you
had), then, after pounds / dollar ratio goes up, you sell pounds and
buy dollars again. At the end of this operation you are going to
have more dollars, then you had at the beginning.
market has much higher liquidity, then the stock market, as much
more money is being exchanged. Forex is spread between banks all
over the planet and as a result it means 24 hour trading.
Unlike stocks, Forex trades are performed with high
leverage, usually it is 100. It means that by investing $1000 you
can control $100,000, and increase potential profits accordingly.
Some brokers provide also called mini Forex Trading, where the size
of minimum deposit equals $100. It makes possible for individuals to
enter this market easily.
The name convention. In Forex, the
name of a "symbol" is composed of two parts — one for first
currency, and another for the second currency. For example, the
symbol usdjpy stands for US dollars (usd) to Japanese yen (jpy).
As with stocks, you can apply tools of the technical
analysis to Forex Trading charts. Traders indexes can be optimized
for Forex "symbols", allowing you to find winning strategy.
Example Forex Trading transaction
have a online Forex trading account of $25,000 and you are trading
with a 1% margin requirement. The current quote for EUR/USD is
1.3225/28 and you place a market order to buy 1 lot of 100,000 Euros
at 1.3228, expecting the euro to rise against the dollar. At the
same time you place a stop-loss order at 1.3178 representing a
maximum loss of 2% of your account equity if the trade goes against
you, 50 pips below your order price, and a limit order at 1.3378,
150 pips above your order price. For this trade, you are risking 50
pips to gain 150 pips, giving you a risk/reward ratio of 1 part risk
to 3 parts reward. This means that you only need to be right one
third of the time to remain profitable.
The notional value
of this trade is $132,280 (100,000 1.3228). Your required margin
deposit is 1% of the total, which is equal to $1322.80 ($132,280
As you expected, the Euro strengthens against the
dollar and your limit order is reached at 1.3378. The position is
closed. Your total profit for this trade is $1500, each pip being
Like many people I am sure you are
interested to know more about Forex trading. To put it bluntly Forex
trading can be either one the best ways to make money. Only those
who take the Forex market seriously will be able to make money with
it in the long term.
The Forex trading market is beyond a
doubt the worlds largest market where all exchanges happen
instantaneously. Thus, trades are a key challenge for even the most
knowledgeable Forex bankers and traders. They have to learn and
consider many factors before performing even a single trade.
At first when currencies began to be traded openly, only
large banks were allowed to perform trades. These days, due to the
advent of internet forex trading and margin accounts almost anybody
can begin Forex trading. This in turn, has added to the liquidity of
the Forex market, and has resulted in a huge increase in the number
of individuals who are now active in the market.
this mean it is easy to earn money through Forex trading? To answer
this we must consider a few things.
If you want make
consistent money you can do extremely well by using Forex trading.
To help you in this end I have listed five key ways to improve your
odds dramatically of making money in the Forex market.
Successful traders are knowledgeable about the
Forex market. They have chosen to educate themselves about every
single vital detail of Forex trading. The best traders know that
every trade that they perform is an opportunity to learn something
new about forex trading.
2. Forex Trading System
All of the profitable traders have a Forex trading system or
strategy. Furthermore, they have the will power to stick strictly to
that system, because the best traders know that by sticking with
their system they stand a far greater chance of earning money.
3. Price Behavior
successful traders also include price behavior in their systems.
They have learned that prices can change quickly and suddenly but
are prepared to deal with those situations when they arrive.
4. Trading Psychology
First-rate traders are
aware of psychological issues that affect the choices of other
traders make when Forex trading. They know that people do not always
act rationally, and as a result this can alter the expected outcome
of a trade. This can help them both when deciding to enter into a
trade or when to exit.
5. Money Management
This is far and away the most important factor that will
determine whether or not you become a successful trader. Averting
the hazard of financial ruin is the main concern of all top traders.
This means both adequately funding your trading account (only with
money you can afford to live without of course) and never entering
into trades that can potentially wipe out all of your assets. Better
to start trading small and always use stop-loss orders to guarantee
that your first trades are not also your last.
This is by no
means an exhaustive list of everything you need to know but it
outlines some of the areas you need to consider before making even
that first trade. Now you know that it is not easy to earn money in
the Forex market, however it is achievable.
to try to have some fun. Just remember these three important things:
be disciplined in your trading habits, manager your money wisely and
enjoy the experience of Forex trading.
What is Forex trading and how did the
The Forex trading name derived from Foreign
Exchange. The first three letters of Foreign and the first two
letters of Exchange are added together.
Forex trading is
about dealing in international currencies to make money. When
trading in the stock market we sell the currency of one country to
buy that of another, hoping to make a good profit.
the onset of the internet, Forex trading was open only to
multinational corporations and banks. Now, many people work from
home with their Forex trading money business.
trader deals in Foreign Exchange at the most appropriate time to
profit from the transaction. Dealing in the stock market requires a
good ability to forecast the outcome of all currency transactions.
Trading in the forex market is popular because although
there are frequent fluctuations in currencies, in percentage terms
they may be small.
You may then wonder how trading in
currencies can be such a lucrative earning opportunity since
fluctuations in exchange can be so little. However, when trading in
large volumes, a small change can mean a lot.
You can make a
lot of money Forex trading online in the stock market. But there are
certain conditions to follow before trading in foreign currencies.
A thorough knowledge about the trends in the stock market is
required. You should also know the basics of this type of trading
and risk taking. Alternatively, you can use a robot for attaining
these conditions. Especially a robot that does all the forex trading
work for you!
You gain if the fluctuation favors you and the
reverse holds true as well. No one can accurately predict the trend
of the currencies. Liquidity is another reason why Foreign Exchange
is so popular.
You can make lots of money trading in
currencies, even if your initial investment is quite low. So
remember that even with a nominal investment, your earning ability
is certainly very large.
Most of the great businesses are
connected to the internet today, and Forex is no exception. It is
now easy for you to work from home and start trading in foreign
currencies. In fact, it is fully conducted online. You are at
liberty to choose when to start trading, without having to meet any
You can quickly start your own work from home
Forex trading business. The process of trading online in the
currency market is fairly simple for anyone to understand.
Especially with a currency robot that does all the trading work for