Since I have no idea of your level of knowledge, I will leave it to you to learn FOREX Market basics if needed. If you are a complete novice then download the FOREX primer from NFA here. It should give you a solid foundation in order to go ahead with this course. An ECN is a computer network of banks and financial institutions and its members sends and receives its data to and from this network. A Market Maker (with a Dealing Desk) creates its own data feed through its dealings between customers and itself. A Marker Maker is thus trading against its customers, how else will they create a data feed? It is not difficult to understand that the data of a Market Maker is significantly more prone to manipulation than an ECN. Manipulation is never in your favor. The most common form of manipulation is stops running. I have tried many FOREX Trading and Charting Platforms and I must admit that I am surprised at how really horrible some are. Most of them are Java based, which means that they are slow, as in slow fills, meaning bad fills (also known as slippage). In this business, speed is a virtue. The faster, the better. On the subject of bid/ask spreads (bid = buyer, ask = seller) I personally would recommend a commission based broker. However, an overwhelming majority of the FOREX brokers take their “commission” from the spread instead. When choosing a broker you should try to find one with a spread of 2 pips (pip is short for Price Interest Point, the smallest price increment) or less, at least on the EUR/USD. Why 2 pips? Well, normally there is always a bid/ask spread of 1 pip (whatever security you are trading), which means that you actually pay 1 pip in commission if the bid/ask spread is 2 pips. On one standard contract of the EUR/USD that would mean USD 10.00 in commission. At a deep-discount commission broker that amount could come down to less than USD 5.00 or half a pip. If your FOREX broker is offering you a bid/ask spread of more than 3 pips (for the majors), he is ripping you off. The wider the bid/ask spread the more difficult it will be for you to make money, since you have to first recoup the spread just to break even. Before you choose a broker, check so it is in good standing with the NFA (National Futures Association) and the CFTC (Commodities Futures Trading Commission). Go toNFA's website and make a search (BasicNet) regarding your broker of choice. You can also find information on brokers on CFTC's website. Also check if your broker has insured your funds via a bond, for example Fidelity Bond 14. Tip: Any fancy computer is not needed to trade FOREX. Put most of your money on a very good monitor, not to strain your eyes unnecessarily. The other thing you should seriously consider is an UPS (Uninterruptible Power Supply) if you don't have one already. Power outages in the middle of a trade is not fun, believe me. And they usually occur when least wanted. The best choice is an On-Line UPS, but they are pricey, so go for a Line Interactive UPS if you are on a budget. The Off-Line type is useless. However, do prioritize account size before computer extravaganza. Action Step: Below I have listed the 7 virtues of trading: Some of the most brilliant minds have have had a go at trading and failed. Why? Simply because they didn't understand that all the above virtues are necessary in order to succeed in the markets. The good news is that you do not need a Ph.D. or an IQ of 150 to make a living from trading. The bad news is that most people have a severe deficiency in at least one of the mentioned virtues. I myself was no exception. Now, ponder each of these and try to figure out your weaknesses. This is extremely important. Everybody is different and there is no one-size-fits-all solution. Be honest with yourself – self-deception is not helpful. Personally I was struggling with discipline, which is one of the more common problems facing traders. At one time I also had a problem with decisiveness, to pull the trigger. If you are losing money, your problem can in one way or another be traced back to a lack in one or more of these virtues. For example, if you have a habit of taking impulse trades, you are lacking in prudence and discipline. The solution is a Trading Plan (we will get to this subject in Step 3b). Know thyself! Return from Learn Forex to FOREX Trading Course A little learning is a dangerous thing but a lot of ignorance is just
In this course I refer only to spot FOREX, not Forwards, currency Futures or Options etc, although the material in this course is applicable to these as well. Currency Futures are better in some respects, but the capital requirement is also higher.
Some of you have no doubt already signed up for an account at a broker and got your feet wet. Not the first Step to learn Forex - well, it's not all that bad – at least you have got some idea of what it takes to turn a profit. However, the chance is that you have chosen an inferior broker and as a result of this an inferior charting and trading platform.
You should consider the following points when choosing a broker:
Another thing to consider is fixed spreads. In general the bid/ask spreads are dynamic or variable, meaning they get adjusted according to volatility. The higher the volatility the wider the spread. At the time of a news announcement, a normal spread of 3 pips can widen to 5 or even 10 pips (in extreme situations even more), putting you at a serious disadvantage. If your FOREX broker is boasting fixed spreads, double check their claims trice. Usually they are only offering fixed spreads during normal market conditions, in other words not when you need them during fast market and news events. Some brokers claiming true fixed spreads are increasing the spreads to ridiculous levels compared to variable spreads, so be aware. Normally, fixed spreads are only worth it if you are a news trader, but take a good look at some brokers and decide if it is for you.
All of the above can actually be quite tricky, if not impossible, to pull together and a compromise is almost unavoidable. Remember that you are playing against the big boys, don't cut corners when choosing a trading and charting platform, it will for sure cost you more in the end. If you think you can start with $200 and Java charts, think again. Who are you trying to fool?
as bad-Bob Edwards
0 comments
Post a Comment