Forex Trading - Advantages and Disadvantages
What is Forex Trading?
Forex, or Foreign Exchange, is the simultaneous exchange of
one country's currency for that of another. This market of
exchange has more daily volume, both buyers and sellers, than any
other in the world. Taking place in the major financial
institutions across the globe, the forex market is open 24-hours
Currencies are quoted in pairs. The first listed currency is
known as the base currency, while the second is called the
counter or quote currency. In the wholesale market, currencies
are quoted using five significant numbers, with the last
placeholder called a point or a pip.
The forex market is one of the most popular markets for
speculation due to its enormous size, liquidity, and tendency for
currencies to move in strong trends. An enticing aspect of
trading currencies is the high degree of leverage available.
Advantages of forex trading
Leverage. Huge leverage is available in Forex trading, often
up to 100:1 meaning that large profits can be generated from
small margin deposits.
Liquidity. The enormous size and global trading of the forex
markets means that the markets in the major currency pairs are
very liquid making trade executions almost instant with little
Ability to go short. Since currency trading always involves
buying one currency and selling another, there is no structural
bias to the market. This means a trader has equal potential to
profit in a rising or falling market.
Trends. Fundamentally, the value of a country's currency is
determined by interest rates and the strength of the economy in
relation to other countries. Currencies, therefore, have a
greater tendency to trend until the fundamentals change.
Disadvantages of forex trading
Leverage. With huge leverage available to forex traders the
danger is that positions which carry too much risk for the
account size can be taken on, leading to margin calls. Effective
money management rules must be adhered to.
Brokers. Retail traders must use a broker rather than dealing
directly in the interbank market. The broker will be the
counterparty in all transactions and is, effectively, making the
market. They can, therefore, widen spreads or even refuse to
trade during volatile trading conditions. To avoid dealing with
brokers an alternative to forex is to use futures. See online
futures trading for more details.
Spreads. As the retail trader must use a broker to trade, they
cannot deal at the interbank rates. A broker will generally quote
a fixed spread of 3-20 pips depending on the currency pair. The
underlying interbank rate might be as little as 1 pip.
Forex is a very large market but for most retail traders
dealing with brokers the odds are shifted against them. Online
futures trading provides a much more level playing field for most
traders who want to take part in forex trading.
Tim Wreford operates Online Futures
Trading, a website that provides information and resources
for traders. Tim also provides an article detailing the
development of a
day trading system, the results of which are updated daily on
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Advantages of Trading
FOREX Over Stocks and Commodities
There are many advantages to Trading FOREX as your main
income generator. Let's start by something that may be
worrying you already.
Trade Exit - How To Cut
Losses And Let Profits Run
Cut your losses short and let your profits run. This is the
essence of your trade exit rules.
Money Management, Part
FEARING LOSSESThere is a huge difference between being risk
averse and fearing losses. You must hate to lose.
Risk and Stock Trading
Fees: The Two Barriers To Overcome If You Want A Successful
You know the old joke:" How do you make a million in the
stock market? Start with two million?" There is no way
around it, risk and stock market fees are a part of trading
that you can't avoid. But, you can manage your risk.
The Forex Market-What, When and Why?Forex, FX and the Forex
market are some common abbreviations for the Foreign
Exchange market. Actually it is the largest financial
market in the world, where money is sold and bought freely.
Money Management - The
Holy Grail Of Trading
Money management determines how much to risk on each
individual trade. This is a vital element of any trading
system - risk too much and the chances of going bust are
too high, risk too little and the reward for trading is too
Opportunities Presented by the New Iraqi
Could it be possible that you are staring right into the
most spectacular financial opportunity of the century?
Operation: Iraqi Freedom will undoubtedly be a war marked
in history for loss and tragedy, American victory, and the
rise of a nation with a new democratic government. But
could it also be a war historically remembered for the
financial opportunity it created for the sharp investors
who keenly recognized an ephemeral chance at the right
time?The War on Iraq ended with a nation placed on the
footstool of many new operations.
If you are reading this article you are probably one of the
many people who have spent countless hours searching for
unique ways to make money on the internet. Very few people
have gone on to succeed and most have failed miserably time
and time again.
Your Mother Could Make
Money In Forex Trading
The question would be not whether she could but rather
would she enter the Forex trading market. The Forex day
trading arena is a veritable snake pit ripe for scam
artists to bilk money out of unwary investors.
The Secrets of the
The first and perhaps most important "secret" is to realize
that your methodology or approach (no matter how good) is
only part of being a highly successful trader. This applies
to any trading style including, day trading, swing trading
or position trading.
Welcome to the World of
Indeed large multinational and individual banks and other
major financial institutions have dominated FX trading
(also known as Forex trading), but there is a paradigm
change in the nature and type of investing. According to
one estimate, in the new millennium, there are over 6
million online investment accounts, up from 1.
How Currencies are
Traded in the FOREX Market
Currencies are traded in dollar amounts called "lots". At
100:1 leverage, one lot is equal to $1000 which controls
$100,000 of a given currency.
Online Stock Trading:
Freedom of Trade
I remember the first time I started to trade online. It was
just before the tech bubble of the late 1990's and the
internet was still something new for most people.
Money Management, Part
There are some common mistakes I've seen traders make in
the area of money management. First, let's understand what
money management is all about.
Keen on starting FOREX trading? Why would you not be? Many
beginning FOREX traders are captivated by the allure of
easy money. FOREX websites offer 'risk-free' trading, 'high
returns' and 'low investment' - these claims have a grain
of truth in them, but the reality of FOREX is a bit more
5 Questions You Need To
Have Answered Before You Back-Test Your Forex
As 90-95% of new forex traders lose money within the first
3-6 months this article helps to guide new forex traders by
asking 5 questions that the forex trader needs to know
prior to back-testing their forex system.Let us jump right
What are Forex signals? Forex signals are paid services
offered by some brokers and independent Forex annalists.
Companies that offer forex signals monitor and analyze the
market for you, providing you with their data via desktop
alerts, email or even SMS and pager alerts.
It is possible to buy and sell money from different
countries on the foreign exchange market called Forex.
Forex currency traders can profit by taking advantage of
the dips and swells in the foreign currency market.
Day Trading Success- The
Key Is Survival
Most new traders tend to focus just about all their time
and energy on finding nearly perfect "setups", but trade
setups, even very good ones, are *not* the key to
successful trading. It's the *way* you trade your setups
that keeps your losses smaller than your gains.
How To Handle A String Of
Everybody hates to lose and unfortunately no one is blessed
with the ability of foresight, therefore losses are an
unavoidable part of trading. When we enter a trade we will
either be right, or wrong, and even if we broke-even we'd
still be classed as being wrong - as nobody enters into a
trade just to break-even! When unsuccessful traders
encounter a string of losses they begin to engage in
self-destructive patterns that help them escape the pain
they are experiencing.
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