In theory, the forex markets are traded just like any other market, but there are some significant differences that need to be considered. Some of these differences are negligible, but some will make a big difference to your profit and loss, and need to be understood before the forex markets are traded.
The forex markets are not offered by any exchange (such as the CME in the US, or the DTB is Europe). They are decentralized markets, where each transaction is conducted directly between the traders involved. This would normally be fine, but without an exchange to regulate the markets, the forex markets are more vulnerable to manipulation by market makers.
Market makers are usually retail forex brokers, but in reality they are traders that set their own prices for a particular market. Market makers make their profit from the difference between the prices that they receive and the prices that they offer. This means that traders that trade with the market makers are not receiving the best available price for their trades.
Friday, April 15, 2011
How to Read a Forex Quote
A forex quote always consist of two currencies. A base currency and a quote currency. The second currency is always the base currency. So for example, if the quote for EUR/USD is 1.36, the USD is the base currency, this quote says that the Euro is worth 1.36 US Dollars.
There are two parts to a forex quote. A bid price and and asking price. The bid price is the price that you will receive if you place an order to go long on a currency pair.
Forex quotes include a bid price and an ask price. The ask price is the price that your order will be filled at if you sell or go short on a currency pair. In the quote above, the asking price for the EUR/USD is 1.3640, this is the price your order will be filled at if you decide to go short. This is also the price your order will be closed at if you are closing a long that you had open.
The difference between the bid and ask price is called the spread. The spread is the way forex brokers make their commission on your trades. If you place a long order you will receive the bidding price. When you close that long order, you will receive the asking price. The forex broker will collect the difference. If you opened and immediately closed an order, without any movement in price, you would have paid the spread to the broker.
Benefits of Forex Trading
1. 24 Hour Market
Since the forex market is worldwide, trading is continuous as long as there is a market open somewhere in the world. Trading starts when the markets open in Australia on Sunday evening, and ends after markets close in New York on Friday.
2. High Liquidity
Liquidity is the ability of an asset to be converted into cash quickly and without any price discount. In forex this means we can move large amounts of money into and out of foreign currency with minimal price movement.
3. Low Transaction Cost
In forex, typically the cost for a transaction is built into the price. It is called the spread. The spread is the difference between the buying and selling price.
4. Leverage
Forex Brokers allow traders to trade the market using leverage. Leverage is the ability to trade more money on the market than what is actually in the trader's account. If you were to trade at 50:1 leverage, you could trade $50 on the market for every $1 that was in your account. This means you could control a trade of $50,000 using only $1000 of capital.
5. Profit Potential from Rising and Falling Prices
The forex market has no restrictions for directional trading. This means, if you think a currency pair is going to increase in value; you can buy it, or go long. Similarly, if you think it could decrease in value you can sell it, or go short.
Forex brokers type
Types of Forex Brokers
There are several types of Forex dealers with online access. They range from the perfectly legitimate brokerage firms to illegal betting houses. Each trader will have to choose their type of dealer carefully to select the right type of dealer – many share similar qualities and access to the Forex market, but their policies and procedures differ quite dramatically.
Beginning traders need to be especially vigilant about the type of dealer they select. Remember, the Forex market remains loosely regulated and this allows for a wide range of trading services that may not be suitable for many traders, particularly beginning traders.
Each type of broker represents a different level in the Forex market. Some levels are very high and have direct access to the Forex market while others are very distant and have very little connection to the Forex market. Yet most of these types of broker are legal in most countries and are used by different types of traders.
Bucket Shops
This type of broker has virtually no connection to the real-world Forex market. Bucket shops depend largely on using currency futures and options. These types of brokers will essentially “book” or take the opposite position of a trade made by a retail trader. However, they will not actually execute them on any exchange. Basically, the bucket shop is betting against the trader. Since the legality of bucket shops is questionable, this type of broker should be avoided by beginning traders.
Book makers
A book maker is very similar to a bucket shop. However, the book maker does not earn profits by winning the “bet”, but rather makes profits based on the spread (difference between the buy and sell price) of the trade. Like the bucket shop, this type of broker has little or no connection to the Forex market. Book makers are illegal in the United States and many other countries. Book makers are also called spread betters or spread betting companies.
One example of a book maker (or spread better) is Delta Index .
Retail Market Maker
These types of brokers represent the vast majority of online Forex dealers. They differ in many respects and offer a wide range of services. Most traders will use a retail market maker. They take different approaches in their connection to the Forex market. Some are directly connected while others deal with an intermediary for access to the Forex market.
Retail market makers are suitable for beginning Forex traders, but they should consider the services offered before making a selection. They are legal in the United States and most other countries.
There are several types of Forex dealers with online access. They range from the perfectly legitimate brokerage firms to illegal betting houses. Each trader will have to choose their type of dealer carefully to select the right type of dealer – many share similar qualities and access to the Forex market, but their policies and procedures differ quite dramatically.
Beginning traders need to be especially vigilant about the type of dealer they select. Remember, the Forex market remains loosely regulated and this allows for a wide range of trading services that may not be suitable for many traders, particularly beginning traders.
Each type of broker represents a different level in the Forex market. Some levels are very high and have direct access to the Forex market while others are very distant and have very little connection to the Forex market. Yet most of these types of broker are legal in most countries and are used by different types of traders.
Bucket Shops
This type of broker has virtually no connection to the real-world Forex market. Bucket shops depend largely on using currency futures and options. These types of brokers will essentially “book” or take the opposite position of a trade made by a retail trader. However, they will not actually execute them on any exchange. Basically, the bucket shop is betting against the trader. Since the legality of bucket shops is questionable, this type of broker should be avoided by beginning traders.
Book makers
A book maker is very similar to a bucket shop. However, the book maker does not earn profits by winning the “bet”, but rather makes profits based on the spread (difference between the buy and sell price) of the trade. Like the bucket shop, this type of broker has little or no connection to the Forex market. Book makers are illegal in the United States and many other countries. Book makers are also called spread betters or spread betting companies.
One example of a book maker (or spread better) is Delta Index .
Retail Market Maker
These types of brokers represent the vast majority of online Forex dealers. They differ in many respects and offer a wide range of services. Most traders will use a retail market maker. They take different approaches in their connection to the Forex market. Some are directly connected while others deal with an intermediary for access to the Forex market.
Retail market makers are suitable for beginning Forex traders, but they should consider the services offered before making a selection. They are legal in the United States and most other countries.
Review of Trade Manager Software
Expectations
My expectations were low, as I haven’t been exposed to any expert advisors that were able to deliver. I always wonder why anyone would sell software that was able to “print money” as so many of these expert advisor sellers claim their software does? Case and point, I expected to be disappointed, keep reading to find out what happened.
Requirements
This is a typical expert advisor with a few changes. To try it out, you’ll need a copy of Metatrader and a demo account with any broker you choose. You’ll need to be at least familiar with the basics of installing software and following a few instructions. This system is Metatrader based, but if you misconfigure it, you could blow your account. I learned this from experience. Windsor Park FX does provide training videos for convenience.
The Basics
This software is fully automated. There are a few scripts that run that tell the system when to take profit and when to stop out. Fully configurable to your strategy, but it comes with recommended settings, that I recommend you follow.
It’s also possible to have Windsor Park FX set up a Virtual Private Server for you to run your Metatrader on. A Virtual private server is an online system that is always on and always trading, even when your computer is off. The advantage of this is that you are assured of proper configuration and power outages or loss in your home or business internet connection won’t affect your expert advisor’s ability to trade. The disadvantage is you may forget to check on it. For this review, I tested the software on my own machine so I could keep an eye on it.
My expectations were low, as I haven’t been exposed to any expert advisors that were able to deliver. I always wonder why anyone would sell software that was able to “print money” as so many of these expert advisor sellers claim their software does? Case and point, I expected to be disappointed, keep reading to find out what happened.
Requirements
This is a typical expert advisor with a few changes. To try it out, you’ll need a copy of Metatrader and a demo account with any broker you choose. You’ll need to be at least familiar with the basics of installing software and following a few instructions. This system is Metatrader based, but if you misconfigure it, you could blow your account. I learned this from experience. Windsor Park FX does provide training videos for convenience.
The Basics
This software is fully automated. There are a few scripts that run that tell the system when to take profit and when to stop out. Fully configurable to your strategy, but it comes with recommended settings, that I recommend you follow.
It’s also possible to have Windsor Park FX set up a Virtual Private Server for you to run your Metatrader on. A Virtual private server is an online system that is always on and always trading, even when your computer is off. The advantage of this is that you are assured of proper configuration and power outages or loss in your home or business internet connection won’t affect your expert advisor’s ability to trade. The disadvantage is you may forget to check on it. For this review, I tested the software on my own machine so I could keep an eye on it.
What is a Neural Scalper
The premise of this expert advisor is that it constantly takes small market variations into account and tries to make use of the information. The expert advisor will take into account multiple time frames for the currency and other data, and try to anticipate market movement.
Setup Required
This product obviously requires MetaTrader since it is an expert advisor. It does trade by itself once you set it up, but it’s quite technical. When you purchase the product you do receive precise instructions, they are not terribly complicated, but you need to be comfortable navigating around on your computer and copying files around.
This expert advisor can be used with any MetaTrader broker, but the creators do have their favorites. They advise that the product works best on brokers with ultra tight spreads.
Test Number 1 with FXDD
My first test was conducted with FXDD for no particular reason other than I already had an FXDD demo account. I was advised that I could get better results with another broker, but I declined to change brokers and installed the EA into my FXDD MetaTrader.
After a rush of trading on the first days, the system seemed to start trading very rarely. It sometimes went days without trading. I assumed this was due to a spread limitation in the program. I was concerned early on because the system immediately took a 10 percent loss on the first trade. It turned out to be the first of two 10 percent losses. However, between those losses the system would slowly edge the account balance back up.
The final result of 1 month of trading with an FXDD account was a gain of 3.91 percent. The starting account balance of the demo account was $4811 and the ending balance was $4999. Not very spectacular results, but remember that this system traded itself, all I did was write down the balance daily.
Setup Required
This product obviously requires MetaTrader since it is an expert advisor. It does trade by itself once you set it up, but it’s quite technical. When you purchase the product you do receive precise instructions, they are not terribly complicated, but you need to be comfortable navigating around on your computer and copying files around.
This expert advisor can be used with any MetaTrader broker, but the creators do have their favorites. They advise that the product works best on brokers with ultra tight spreads.
Test Number 1 with FXDD
My first test was conducted with FXDD for no particular reason other than I already had an FXDD demo account. I was advised that I could get better results with another broker, but I declined to change brokers and installed the EA into my FXDD MetaTrader.
After a rush of trading on the first days, the system seemed to start trading very rarely. It sometimes went days without trading. I assumed this was due to a spread limitation in the program. I was concerned early on because the system immediately took a 10 percent loss on the first trade. It turned out to be the first of two 10 percent losses. However, between those losses the system would slowly edge the account balance back up.
The final result of 1 month of trading with an FXDD account was a gain of 3.91 percent. The starting account balance of the demo account was $4811 and the ending balance was $4999. Not very spectacular results, but remember that this system traded itself, all I did was write down the balance daily.
What is the L.M.T. forex system
First let's discuss that items that you get with the L.M.T Forex System. The L.M.T. instruction book
A specialized MetaTrader indicator package
A bonus ebook on news trading
The L.M.T. instruction book
A specialized MetaTrader indicator package
A bonus ebook on news trading
What does the LMT Forex System Cost?
The cost of the system is $149. Not really an outrageous price, but not really a shoe string price either.
The Sales Page
The sales page did not impress me. I actually expected this to be a really poor product because of the level of overselling on the sales page. These types of sales pages typically lend themselves to very poor, fly by night products.
The L.M.T. Forex Trading System
The system itself is not complicated. It runs on the metatrader platform as a template and indicator set. The system will print buy and sell signals on the chart for you. The system also gives you the overall trending for the currency pair that you are trading.
The actual trading of the system is up to you. The signals show up on the chart and you have to place the trades manually and then manage them accordingly. Because of the fact that the system is so discretionary, trading results will vary widely.
A specialized MetaTrader indicator package
A bonus ebook on news trading
The L.M.T. instruction book
A specialized MetaTrader indicator package
A bonus ebook on news trading
What does the LMT Forex System Cost?
The cost of the system is $149. Not really an outrageous price, but not really a shoe string price either.
The Sales Page
The sales page did not impress me. I actually expected this to be a really poor product because of the level of overselling on the sales page. These types of sales pages typically lend themselves to very poor, fly by night products.
The L.M.T. Forex Trading System
The system itself is not complicated. It runs on the metatrader platform as a template and indicator set. The system will print buy and sell signals on the chart for you. The system also gives you the overall trending for the currency pair that you are trading.
The actual trading of the system is up to you. The signals show up on the chart and you have to place the trades manually and then manage them accordingly. Because of the fact that the system is so discretionary, trading results will vary widely.
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