Learn Forex Technical Analysis

In the previous chapter we took a look at the two kinds of analysis briefly, and discussed the various advantages and problems associated with making use of them. In this chapter we’ll examine technical analysis in greater detail.

If you’re dismayed by your inability to correctly interpret price movements in light of technical data, you may find the information in this article invaluable. If you’re a beginner, remember that each indicator has a particular configuration in which it generates the most reliable signals. Just like we cannot use a spade in a task better suited to a screwdriver, it is wrong to use the RSI for analyzing a trend which is better analyzed by a combination of moving averages.

Two important rules of technical analysis are to keep it simple, and to be strict and disciplined with money management and risk controls. Technical tools are not infallible, and their greatest use is in identifying and acting on the scenarios which offer the best risk/reward potential for the trader. In the absence of certainty, even the most capable technical trader will be in danger of seeing his account wiped out, if he doesn’t take the necessary steps for ensuring that he is properly controlling his risk allocation. Once those steps are taken, we are cleared to go on our journey to riches and prosperity.

Let’s take a look at the various tools used by the technical analyst in evaluating and understanding the price action.
 

Oscillators
Price action has no limits. The price of a currency pair can theoretically move anywhere between zero and infinite on the charts, and while in practice there is always an upper limit, it is extremely difficult to estimate where it should be. For example, based on today’s prices in EURUSD at around 1.35, we would regard 1.50 a very high price. But while this is true, how about 1.45, or 1.55? Since all those prices are “high” on an arbitrary definition, we would have great difficulty in placing a stop loss or take profit order anywhere on the charts. It is clear that we need to confine the price action into a more practical range within which we can interpret the developments more conveniently.

This lack of precision in defining a high or low price for a currency pair within a specific time frame is overcome by the usage of oscillators. There are a large number of oscillators developed through the past decades each of which depends on a different formula, but all of them aim at rearranging the price data mathematically in a way that will facilitate the designation of oversold or overbought levels. An oversold value indicates that the price is too low in comparison to where it has been in the past. Conversely, an overbought reading indicates that traders have driven the quote too high in their excitement. Both cases suggest that a contrarian trade may be profitable.

Oscillators fluctuate between a predefined upper and lower value, beyond which an oversold and overbought level is defined. As the price moves to the overbought level, the trader will contemplate a sell order. When the indicator signals an oversold price, the trader will consider placing a buy order. Oscillators are defined according to the price pattern where they function best. Some are used best in a trending market, while others are suited better to ranging or periodic markets. Examples of those that function best in a ranging environment are the RSI and Stochastics indicators. In contrast, the Williams oscillator and the MACD are thought to emit their most useful signals in a trending market.

Many experienced traders are skeptical of the validity of overbought and oversold readings on an oscillator even under the best of circumstances. It is important to remember that oscillators reduce the arbitrariness in defining what a high or low price is, but do not eliminate it altogether. For example, while an RSI reading at 80 is regarded as an overbought value, the price in many cases ignores this contention and keeps charging on, reaching 85-90, even 95 without looking back.

In order to avoid this problem, many make use of the concept of divergence/convergence between price and the indicator. As the divergence/convergence phenomenon is rarer in practice, greater significance is attached to its occurrence. A bearish divergence is the situation where the oscillator registers lower highs, while the price is making higher highs. In this case it is thought that the uptrend is running out of power. A bullish convergence occurs when successive lower lows of the price are coupled to successive higher lows of the oscillator. This is thought to signal that the downtrend is losing momentum. In both cases, a contrarian trade is advisable.

The RSI, Stochastics, Average True Range, Williams Oscillator, MACD, Force Index are a few of the indicators that are in common use among currency traders.
 

Moving Averages and Trend Indicators
Oscillators find the greatest use in ranging markets. But while ranges offer many profitable trades to those who like to concentrate on them, it is a fact that many of the greatest traders in history were trend followers. Trends can be overwhelmingly profitable for those who can capture them in time and possess the tools necessary for understanding and exploiting them. The fundamental analyst has his economic theory, his statistical tools, and analytical skills to depend on while studying trends, while the technical analyst makes use of certain indicators tailor-made for trend analysis.

Perhaps the most useful of all trend following indicators is the moving average. This indicator adds up the closing prices of a predefined period (like five minutes, two hundred hours, or ten days), and divides them by the moving average period, reaching at the indicator’s present value. The main reason of using the moving average is determining a mean value around which the price action fluctuates. The difference between an ordinary numerical average and a moving average is that the value of the moving average is constantly updated: as the price registers new highs or lows, the moving average also follows it, but at a slower pace.

There are two kinds of moving averages. The simple moving average (SMA) is the one that we have described in the previous paragraph where the prices of each period receive the same weighting in the calculation of the moving average. In other words, the price of five minutes ago is of the same value as the price of five days ago in determining the value of the moving average. The other kind, the exponential moving average, is a little different in that it gives the prices of the latest period a higher weighting, that is, the indicator is much more sensitive to price changes in the latest period than it is to the values registered weeks or months ago. The exponential moving average is not that useful when used in conjunction with the price action itself. Many traders choose to use the exponential moving average together with a simple moving average of about the same period, and interpret the crossover or divergence/convergence between those two trend indicators as entry or exit points.

Apart from the moving average, an important indicator favored by many technical analysts is the Bollinger Band. This indicator can be used, in combination with others, for predicting the breakdown of a range pattern, but it is also useful for determining entry or exit points in trading trends. During the course of a trend there are many periods where the trend calms down, and price settles into a consolidation pattern. The Bollinger bands are used to predict the end of these patterns, and to open positions as the consolidation phase concludes.

There are many other kinds of indicators which can be used in combination with others to generate trade signals for trend patterns. Once could even write his own indicator with a little bit of practice and understanding of market dynamics. The predictive power of the indicators, while valuable, are most fruitful when they are coupled to prudent money management methods which we’ll discuss a while later.
 

Price Patterns
Both in trending and ranging markets, it is possible to break down the price action into various smaller scale patterns where the market consolidates and prepares the next phase of the movement. Similar to the concept of tension and resolution in both music and literature, prices move as tension is created during the consolidation phase, and resolution of the tension draws the market forward as the consolidation pattern breaks down.

There are many kinds of price patterns. During the development of a trend, triangles of all kinds are ubiquitous. In a range pattern, consolidations occur at the support and resistance levels of the price action, but the breakout fails to breach those levels. It is also possible to recognize many short-term range patterns developing during the course of a major trend: the successive legs of the trend follows the breakdown of those range patterns in succession.

Technical analysts divide price patterns into reversal patterns and continuation or consolidation patterns, but as we discussed shortly before, as branches of a main trend break down, reversal patterns can be found in the course of a trend too. A continuation or consolidation pattern (such as triangles) signals that the trend is ongoing, but is going through a phase of rearrangement, as market participants reevaluate their strategies, and readjust their positions. A reversal pattern signifies that the underlying price action is losing its power: the present dynamics behind the market action may soon be invalidated by market developments.

The use of price patterns in technical analysis is widespread, but it must be born in mind that in many cases the formations discussed by the technical analyst is obvious and actionable in hindsight only.
 

Conclusion
There are a vast number of tools available to the technical trader. While this richness can be useful for identifying and evaluating different scenarios, it can also be confusing for the novice and experienced trader alike. The power of technical analysis lies in the precise nature of its predictions, but there’s nothing precise about setting up the correct configuration of indicators which will generate the most useful predictions.

In spite of these facts, technical analysis is the most widespread method for the study of the market action. It is used by millions of traders all over the world, and consequently, its predictions possess a kind of power that is often thought to be unique to religions: as its dictates are confirmed by the collective behavior of vast numbers of technical traders, only the reckless will deny the value of technical studies.

Learn Forex Trading: Fundamental Analysis vs Technical Analysis

In analyzing price action, forex traders make use of two main kinds of analysis. Those who concentrate on price action, and ignore most other factors choose to direct their efforts at perfecting their skills at technical analysis, while traders who prefer to study the economic events that cause the market action mostly focus their efforts in studying fundamental analysis. In this article we’ll take a brief look at both of these concepts, before moving onto examine them in greater detail in further lessons of our school.

Many traders combine the information provided by these two types of analysis to generate trading signals. Others concentrate on one aspect of analysis and exclude the other from their calculations, and it is fair to say that either approach can be valid depending on the circumstances. There are traders such as Martin Schwartz who acquired reputation and wealth by trading on the basis of technical analysis, along with those like Jim Rogers whose success was based on fundamental analysis almost exclusively. But while they would disagree on many subjects, both of these people would probably agree that emotional control and discipline are the most important aspects of a successful trading career, even before analytical prowess.
 

How Different are Fundamental and Technical Analysis?
We should note here, before going on with our discussion of the various aspects of the two analytical schools, that while the explanations of the fundamental and technical analyst on a phenomenon may differ from each other, the end result, and the trade recommendation can in many cases be the same.

To give an example of this, we may examine the classical case of a parabolic price graphic which would make both kinds of analysts cautious, but for different reasons. The technical analyst would look at his charts, notice the extreme values registered on the indicators, and would caution against joining a trend that is in danger of suffering a sharp reversal as the inevitable countertrend movement occurs. The fundamental analyst would look at the euphoria in news sources and analyst community, consider the declarations of government authorities and important personages, and would probably give the same warning. While the tools and indicators used by these two individuals are different, their actions often coincide with each other.

Fundamental and technical analysis are not exactly the same thing, and at least in the longer term, the predictive power of fundamental studies is almost certainly greater. Nonetheless, these two are akin to two different languages describing the same phenomenon, and at least on hindsight, they always show the same direction, and reach the same conclusions.

Let’s take a brief look at these two schools.
 

What is Fundamental Analysis
Fundamental analysis is the discipline that tries to make sense of price movements in light of economic data and news flow. In comparison to technical studies, fundamental analysis has a larger selection of indicators. While many traders choose to focus on the news releases and indicators that appear to determine the day-to-day movements in the financial markets, fundamental analysis in fact studies many other aspects of economics including politics, financial law, social attitudes, in addition to the many other aspects of human life.

Fundamental analysis aims to establish a cause and effect relationship between market movements and economic developments. In that sense, it is different from technical analysis which regards the price action as the beginning and end of trading. While technical analysts generally argue that the price action reflects all information available to the market, fundamental analysts seek to identify imbalances and “errors” in the market that may offer profit opportunities. Unlike the technical trader, the fundamental trader is always skeptical of the price action, and seeks alternative explanations to the “wisdom of the market” in evaluating price trends.

While this type of analysis has been proven to be efficient and reliable through the ages, there are a number of issues that we must keep in mind in order to avoid being too optimistic about the predictive powers of our approach. While fundamental analysis can and often does indeed warn us on possible errors in market attitudes to economic realities, there’s no indication that the correction will happen anytime soon. Similarly, bubbles and market extremes often cause analysts to rationalize the unhealthy positioning of the market, invalidating the healthy advantage of skepticism inherent in the fundamental approach.
 

Advantages of Fundamental Analysis
The greatest benefit derived from study of fundamental analysis is the ability to understand the causes that drive the market action. By understanding market dynamics, we can be confident in maintaining a position as long as the cause that triggered the trade exists. A thorough grasp of fundamental analysis also ensures that we do not lose our composure in the face of market volatility. Those who employ fundamental studies in gauging the price action are confident that they are on the tracks of the greatest geniuses of forex trading. All those who successfully made millions or billions in this business were users of fundamental analysis; and there is no reason to doubt that if we were to use the same methods we can achieve the similar, if not the same results with them.
 

What is Technical Analysis?
Unlike fundamental analysis, technical analysis is a relatively new discipline that is still being perfected by its practitioners. Still, years of continued use has made it an inseparable part of the traders arsenal: technical studies are probably the only tools used for determining entry or exit points, and in short term trading, technical analysis is probably the only analytical tool that has any predictive power.

Technical analysis is based on three important assumptions about market events. First, technical analysis posits that the prices discount all information available to the public. Secondly, it assumes that price movements are not random, and that technical tools can be used to establish the underlying currents behind the price action. Third, it claims that price trends tend to repeat themselves. In other words, past developments provide some guidance on the direction and magnitude of future price action. In consequence of these three assumptions, technical analysis regards the price action as the conscious activity of a mass of financial actors who act collectively as if they were one large sentient being with emotions and feelings. In other words, just like the case with a beehive, or an ant layer, the seemingly independent actions of individual traders are targeted toward achieving the most sensible and logical course for prices in general.

Naturally, if collective will of traders is rational and makes meaningful decisions, then the future choices of that body would depend on its past actions. And if such a logical coherence, and a train of reasoning between past and present exists, it would be possible to examine and understand the rules behind that train of reasoning, and consequently to follow it and to profit as a result.

And there lies the basis of technical analysis. Just as we deduce that a person who takes out keys from his pockets is intent on opening the door, we expect that a certain spike or collapse in prices, a period of trending activity, or consolidation must lead to their logical conclusion in the markets in breakouts, or successive highs or lows, the nature of which is determined by technical analysis.
 

Advantages of Technical Analysis
Technical analysis is simple and straightforward, with tools available to every one from the seasoned hedge fund manager, to the novice retail trader. In addition, technical tools are easier to interpret than fundamental indicators, the understanding of which usually requires a period of diligent study. Finally, since technical analysis focuses on the price action exclusively, the technical trader has only one needle in his compass: the price, on which any calculation about profits or losses must be based.

Technical studies have been refined and perfected over the years, and by using them we are making use of the heritage of thousands of experienced and knowledgeable traders who have contributed to the effort. By mastering the various aspects of technical trading, we can also minimize the role of guesswork and conjectures in analyzing the price action. While technical studies can give conflicting signals about the future, the error, if any, is on the part of the interpreter. By recognizing our flaws, we can better our analytical skills, and with better skills, wealth and success will be just a single blink away.
 

Conclusion
Both types of analysis are useful for examining market action. Your trading style, and attitude to trading will determine which kind of analysis you will find most beneficial. But before making that decision, it is a good idea to study the subject of analysis in slightly greater detail. In the next few sections, our subject will remain the various aspects of forex analysis.

Learn Currency Pairs and Their Characteristics

Of course, we can’t trade currencies without knowing about them. There are a large number of currencies that traders can choose from for establishing their trades and portfolios, but most currency traders will concentrate on a few of the more widely traded, and liquid pairs such as the EUR/USD, GBP/JPY, or USD/CHF, which are all currencies of major powers. It is possible to divide currencies into many different groups based on the criteria chosen, but in general currency account position and interest rate policies of central banks are the most important values for classifying them.

If we try to divide currencies on the basis of financial soundness and economic policies, the following is one plausible categorization.
 

Reserve Currencies
These are the currencies of nations which have a dominant role in global economic transactions. The European Union, Japan, the United States are the important powers the currencies of which fill the coffers of central banks around the world. Among those, the role of the Japanese Yen as a reserve currency has been diminishing since the 90’s, while that of the Euro has been increasing continuously since the launch of the currency. Among all those changes however, the US Dollar has remained as the one major currency that has the greatest preponderance over everything else in central bank currency allocations. With about two thirds of global forex reserves denominated in the dollar, the USD is the reserve currency of the world.

For traders, an important rule of thumb is that reserve currencies as a group tend to depreciate in times of boom, and to appreciate at times of economic trouble. This is a generalization; needless to say there is a degree of variation among the behavior of different currencies, but due to the financial structure of the global economy, economic activity usually leads to abundant supply of reserve currencies during robust economic growth.

Commodity Currencies
Currencies such as the Australian and Canadian Dollars, the Brazilian Real, the South African Rand, or the Russian Ruble, which are the monetary units of commodity exporting nations, are called commodity currencies. There’s a great degree of diversity among commodity currencies in terms of trade balance or economic sophistication. However, due to the large currency inflows generated by proceeds from the sales of commodities, the value of these currencies is strongly dependent on the buoyancy of global commodity market.

Exporter Currencies
Currencies of nations like Singapore, Japan, China, with large forex reserves accumulated through exports, are called exporter currencies. The value of these currencies is related strongly to the health of the global economy. As they depend on foreigners for economic buoyancy, any disturbance to the health of the global financial system can have outsized consequences for these nations. Nonetheless, due to their large forex reserves they are well-placed to withstand the impact of any economic shock better than most of their peers.
 

High-risk currencies
These may also belong to any of the other categories. High-risk currencies are the currencies of nations with high deficits (budget or trade), and high interest rates. Examples are Romanian Leu, currencies of Baltic nations, or Turkey. These currencies appreciate at times of boom, as capital from developed economies is directed to their assets, and depreciate during recessions and crises, as global capital discards risky assets.

Conclusion
Although the descriptions above may sound simple and brief, they already contain much of the basic concepts that are important for currency traders. The key to a successful trading career is carefully evaluating the widely available data, and establishing a disciplined and simple strategy which can be used to exploit the information for profit. How do we evaluate the data? What kind of tools do we use to make sense of the widely available and complicated information that we must sort out to generate trading signals? This is the subject of forex analysis, which we’ll discuss in the next chapter

Learn Mechanics of Online Forex Trading

After examining the basic concepts, let’s briefly discuss how a trade is opened, and look at a few basic ways of controlling risk and managing our funds.

While most trading software is straightforward with order entries and the opening or closing of a position, the beginner may be bit confused by terms like stop-loss, trailing stop, or take profit orders, at least a basic understanding of which is crucial for a properly managed account.

A market order instructs the broker to buy or sell a currency at the current market price. As such, neither the trader, nor the broker has any control over where the trade is executed. The only commitment that the broker makes is that the order will be executed as soon as possible, which is usually instantly. Let us note here that in times of market turmoil, spreads can widen greatly, and the price at which a market order is executed can be shocking to the inexperienced trader. Consequently, it is a good idea to avoid market orders at such periods.

By contrast, a limit order instructs the broker to execute a trade only when a particular price value is reached. No action will be taken until the price quote is reached, regardless of the length of time. The disadvantage of the limit order is that the market may never move in the desired direction, and the trade may never be executed as a result. On the other hand, the limit order facilitates better planning, reduces arbitrariness in trading decisions, and eliminates the dangers associated with sudden price spikes to the greatest extent possible.

The stop-loss order is a kind of safety mechanism that puts a ceiling over the losses that a misplaced trade can cause. By entering the stop-loss order, we’re specifying the maximum amount of unrealized losses that we are willing to tolerate, beyond which our confidence in the trade would not be maintained. Naturally, the stop-loss order should be set in the direction opposite to where we expect the price quote to move. The execution of a stop-loss order, as with the limit buy or sell orders, is automatic.

The trailing-stop order is a relatively uncommon order type. In this case, the stop-loss order is renewed automatically by the trading software at intervals specified by the trader. For instance, when we buy the EUR/USD pair at 1.3500, set our stop-loss order at 1.3400, and set the period of the trailing stop at 50 pips, the software will revise our stop-loss order higher at intervals of 50 points as the price moves and our account shows unrealized profits. When the price reaches 1.3550, our new stop-loss would be entered automatically at 1.345. When the price reaches 1.36, the new stop-loss would be at 1.35, ensuring a risk-free trade.

The take profit order specifies the price quote at which we would like our position to be closed, and profits to be realized.

Learn Forex Pips, Lots, Margin and Leverage

Knowing and understanding the proper terminology within the forex market is essential in becoming a successful trader.  In this article we discuss and define what pips, lots, margin and leverage are.  We also provide examples of each for easier comprehension.
 

Pips and Lots
Currency traders quote the value of a currency pair, and trade sizes, in pips and lots. A pip is usually the smallest amount by which the value of a currency pair can change, although these days some brokers offer fractional pip quotes too. In example, when the value of the EUR/USD pair goes up by one tick (i.e. pip) the quote will move from 1.2345, to 1.2346, and the size of the movement is just one pip. An important guideline for the beginning trader is to measure success or loss in an account by pips instead of the actual dollar value. A one pip gain in a $10 account, is equal, in terms of the trader’s skill, to a 1 pip gain in a $1,000 account, although the actual dollar amount is very different.

The smallest size in currency trading for professional traders is called a lot. For USD-based pairs, the lot size is 100,000. In other words, when you enter a trade with your margin account, the smallest amount that you can buy or sell is 100K, regardless of the size of your margin.
 

Margin and Leverage
Another important concept in currency trading is the twin phenomenon of margin and leverage. Since forex prices move very slowly (in terms of the actual change in value), the vast majority of traders leverage their accounts to create meaningful returns in short term trading. In the absence of leverage, it is difficult to generate even a ten percent return in the forex market, which is not the kind of profit that most forex traders have in mind when beginning their careers. Although even unleveraged forex trading can be very lucrative for traders with deep pockets, as retail traders, we will always be in need of some form of leverage to justify the time and energy spent towards perfecting our skills.

When you open a forex account, the broker will request that you deposit a small sum, known as margin, as insurance against the losses that your account may suffer. With this small sum, you’re able to control a much larger amount, enabling greater gains, but also greater losses than you would be able to achieve with your deposit. It’s easier to understand margin and leverage in the context of a borrowing process. The lots that you can trade are borrowed from your broker, who requires a margin deposit as an insurance against losses. The ratio between the funds borrowed by you, and the margin that you deposit as insurance is called leverage. Thus, if you set a leverage ratio of 100:1, enabling the trade of 1,000,000 USD with just 10,000 USD in deposit, but eventually trade just 100,000, the actual leverage that you would be using is 10:1.

In order to understand how to manage your account you must gain a good understanding of leverage. Failure to pay proper attention to leverage and margin may result in a margin call and the broker may liquidate your position in order to ensure that your losses do not reach a level where your margin deposit is insufficient to cover them. Increasing leverage = increases risk.

Read a Currency Quote Guide

Forex trading is a form of commodity trading. In the commodity market traders buy and sell assets like oil or gold in exchange for currencies. In the forex (currency trading) market the assets bought and sold are currencies themselves. As a result, unlike in the commodity, each currency’s value is determined relative to another. For example, when the currency trader buys an ounce of gold, he must pay for it with the US dollar, which creates a quote in which the price of the metal is defined in terms of a currency which is another asset class. But when the forex trader buys or sells the Euro, he must pay for it with another currency (Australian dollar, Swiss Franc, etc) in which case the quote created has the same asset class on both sides. The result of this is that it is impossible to speak of absolute value in the forex market because it is possible to value the Euro in dollars, Francs, or Yen, each being a valid choice as a value indicator. In the case of stocks, or commodities, the value can only be indicated in USD; therefore it is possible to speak of an absolute value.

How to Read and Understand a Currency Quote
Upon downloading and opening the software of your chosen forex broker, the first concept that you will encounter is the forex price quote. The quote is simply the record of a previous transaction in which a currency pair changed hands. When two financial actors exchange currencies, the price at which the transaction occurred is called a quote. Let’s see this with an example.

EUR/USD 1.3524

In the above quote, the currency on the left side is the currency which was bought by us, while the one on the left is the one that we sold to finance our purchase. The number signifies the value at which the currencies were exchanged. Or to put it in a short and simple mathematical form, when we bought 1 Euro, the value of one Euro was equal to 1.35 USD, and we had to pay that much to buy the currency.

Upon executing the trade, we are now long the Euro, and short the dollar (we bought the Euro, and sold the dollar.), in either words, we have an open position. The principle of profit in currency trading is the same as in all other kinds of trading activity: to buy cheap, and to sell expensive is our purpose. Consequently, we will wait for the value of the Euro to rise above 1.35, to for instance, 1.38, where we will be able to close our position by selling the Euro and buying back the dollars, and making a profit. Since our base currency is the dollar, our profit will also be measured in dollars.

Let’s solidify this with an example:

We buy 1,000 EUR for 1,350 USD, with the quote at 1.35. We wait until the quote is at 1.38, when we close our position by selling our 1,000 Euro at 1,380 USD. Since our initial trade was worth 1,350 USD, the difference between 1,380 and 1,350, that is, 30 dollars, becomes our profit.

Free Forex Course for Beginning Traders

Would you like to start trading forex but feel like success depends on finding the alchemist’s stone? Do currency quotes, technical indicators, economic data sound like Merlin’s Book of Magic to you? Do you suspect that only geniuses can beat the forex market and achieve the spectacular profits realized by some legendary traders? You’d like to rule the land of money, yet do you worry that the scepter and the crown are too heavy?

Don’t worry: We are here to save your forex career from the hovering curse of ignorance. We’ll deliver you from the groaning void of losses and financial ruin that results from failing to understand what currency trading is. In this website you’ll find the best kept secrets of forex trading: Lots of information on forex scams, regulation, safe brokers, a wealth of data on various forms of analysis, and all the groundwork necessary to start your trading career.

There is no born-trader. We all suffer the emotional issues associated with losses. And there has never been a trader whose analysis wasn’t defeated every once while by the demons of volatility. Our main purpose is to hasten the learning process by supplying you the most useful information in the simplest manner possible. With the power you’ll gain by the knowledge in these pages, you’ll defeat the Goliath of forex with Biblical ease and with commitment and determination, the spoils you gain may well be unlimited.

Choosing the Right Forex Broker

Before choosing a broker, we hope you have you studied the previous articles in our forex school and concluded that you’re qualified to trade forex on a preliminary basis? Do you possess the determination and moral courage necessary to recognize and overcome emotional problems inherent in forex trading? Do you possess the drive and the intelligent focus necessary to concentrate all your energies on the one goal of success in whatever endeavor you take?

If you possess the drive, focus, and perseverance necessary for concluding any activity successfully, forex is your ground. Armed with the necessary knowledge, and almost immune to the tricks and lies of fraudsters through the information that we provide in this website, you are ready to step to the next phase of your trading activity. After acquiring the background information, the first step of trading forex must be the opening of an account with an online broker.

There are a large number of forex brokers in the retail forex market these days, each touting its services as the best in the entire market. It can be a daunting task to sort out between them seeking those that are best suited to your needs, however, as usual; we have worked to simplify your task by reviewing some of the most reliable brokers in the market. You can find those in the forex broker section of this website. Here we would like to explain the importance of the various criteria according to which you can screen the brokers we have reviewed, and make your choices. Due to the vast diversity of options, it is not possible to speak of a broker who is perfect for all kinds of traders. Instead, you should carefully consider your own expectations from trading, and compare that with what is offered by the broker, and choose the one that is best suited to your needs.

Here we’ll examine the criteria in order of importance.
 

Security
What is the point of opening a forex account if the funds we deposit will be unsafe with the broker, or worse yet, will be stolen and misappropriated? What is the logic of studying analysis and currency fundamentals if the profits that we make are pilfered by shameless crooks, or squandered by irresponsible individuals who cannot even manage themselves decently?

Thus, the first necessity for the right broker must be the safe and reliable track record of the firm. On the other hand, it is clear that the retail trader possesses neither the tools, the time, nor the expertise for determining which of the brokers are reliable, and which are not. Fortunately, the regulatory authorities in this country and in other financial centers of the world do their best for screening and weeding out the unreliable ones among the many decent firms. Our best course is to ensure that the broker we choose is a member of NFA, and is registered with CFTC in the US, and with other relevant authorities in other parts of the world.

And last but not least, to make the task even easier for you, we have reviewed some of what we believe to be the best and most reliable firms in the market. All that you need to do is to go and check out the relevant section.
 

Initial Deposit
Unavoidably, the second most important variable in our equation for comparing brokers is the initial deposit requirement. Many traders prefer to begin their careers by risking very small amounts which leads them to seek the broker offering the lowest initial deposit requirement naturally. This reasoning certainly has its merits; however, the initial deposit requirement should in fact be one of the last considerations in choosing the best broker for you, unless you really have a very small amount of capital that you want to risk for forex trading.

A serious broker offering excellent services may choose to keep the initial deposit requirement relatively high (around $500, for example) in order to ensure that the clients are serious about their trading practices. In addition, forex is usually so volatile that a less than optimally capitalized account is highly likely to be wiped out during the ordinary fluctuations in the market. We have already discussed the difficulties associated with undercapitalization, and those who have read that article should have little trouble in understanding the reasons behind our deemphasizing the importance of initial deposit requirements.

It is self-evident that a beginning trader should only risk the amount that he can comfortably afford to lose. In that sense, the initial deposit requirement of the broker should never be more than what we can afford. On the other hand, beginning our career with a pittance like $10-50, and trading at 10:1 leverage cannot be considered a wise choice. Trading with such small sums is similar to trading in a demo account, and the emotional lessons gained will probably be of little value.
 

Spreads
Spreads are extremely important for forex traders, seasoned, or novice. Since the broker usually receives the compensation for its services by widening the bid-ask spread beyond the quoted values in the wholesale interbank market, a wide bid-ask spread represents a larger amount of money leaving your pockets, and entering those of the broker’s. You pay this fee regardless of the profit or loss you make with your trade: so there’s always good sense in ensuring that you choose the broker which offers one of the more competitive spreads in the market. Sometimes it may be advisable to open an account with a broker that charges slightly higher spreads in exchange for the safety offered by its long history and track record. But even in that case, a spread beyond three for the EURUSD pair, for example, is not a very good idea.
 

Deposits and Withdrawals
It is not a good idea to trade forex if you cannot withdraw your earnings with ease. Conversely, the broker must facilitate your termination of the account in case that you’re not entirely satisfied with the services offered, regardless of the reasons. This should be non-negotiable: since the broker is only the custodian of your funds, there’s no justification for any unreasonable delays or excuses when you make the request to withdraw your funds.

Similarly, you, as the client, should have no headaches at all when depositing funds with the broker. Come to think of it: if the broker is not even capable of ensuring that your deposit process is smooth, how likely is he to guarantee a painless and satisfactory trading experience for you?
 

Margin Requirement
Margin requirement and leverage ratios are the second most important aspect that must be considered during the choice of the broker. For the beginner, the lower the leverage the better. Since higher leverage is only advisable for traders with a proven track record of profits and success, the beginner should be uninterested in the maximum leverage offered by a broker. Instead, since he must be allowed to get used to leverage on a step-by-step basis, the minimum leverage available is far more useful as a criterion.

For an experienced trader, evaluating the value of a high leverage options can be a bit more different. Since, by definition, successful traders use highly divergent techniques in their trades, there is no general rule for determining the optimal leverage ratio for a seasoned trader. However, for traders who plan to hold a position for long term, 10-to-1 may well be the highest sensible value.

In short, beginners should choose brokers that offer the lowest minimum leverage option, and the greatest customizability. With such a setup, it is possible to increase leverage gradually, in tandem with our improving and developing skills.
 

Trading Platform
In online forex trading, almost all activity is conducted through the trading software. Indeed, for a safe trading experience, this is also a must: in order to ensure that the broker doesn’t temper with your trades, and misquote currency prices to you, you should always seek those offers which allow the greatest automation, and reduce human interference to the lowest level possible. This is only possible with a successfully implemented trading platform.

What should you look for when choosing the trading platform? Does it offer a wide array of charting tools and technical indicators for evaluating the price action? What about financial news? Is the interface clean and uncluttered? Since you may spend a long time looking at the graphics and examining charts, is the appearance of the platform physically pleasing and relaxing?

Are the servers of the broker reliable? Do you have connection problems in the middle of something important while using the demo account? How wide are the spreads during market volatility and news releases? Is slippage and misquoting a problem? Can you customize the platform to suit your trading needs and language requirements? Does the platform receive frequent updates and bug fixes?

These are the most basic issues related to the trading platform. Needless to say, an advanced, easy-to-use, and uncomplicated trading platform can make the task of the beginner a lot easier. But even the seasoned traders will find that using a well-crafted, well-maintained forex software can greatly reduce the element of stress during trading.
 

Customer Service
Software is prone to generating errors. This has always been the case, and will remain so for the foreseeable future. When there are problems with the trading software, or delays, or issues with deposits and withdrawals, you will need to seek the aid of the customer service.

A friendly, patient, and helpful customer service can be profit multiplier if used correctly. In those cases where the customer service is run by individuals with trading experience and understanding of economics and analysis, you can even hasten the learning process by asking questions.

Before opening your account, it is perhaps a good idea to read our reviews on customer service of various brokers to receive a preliminary impression of how competent the people are. While we cannot just pick a broker because its customer service department is professional, success in this department is certainly a promising sign for overall competence.
Account Types

Some brokers offer a large number of account packages. Others choose to offer one package with many customization options. In general, the number of account packages is not very important, provided that the broker offers a highly customizable main offer with adjustable leverage and margin requirements suitable to the needs of clients from different backgrounds and experience levels.
 

Currencies Offered
Finally, it is a good idea to choose a broker that offers the widest array of tradable currencies. In evaluating the currency pairs offered, you should try to make sure that different currency pairs of different classifications are available, instead of concentrating on just the number of the total offers. For example, if a broker offers three pairs of major economic powers, three pairs of emerging nations with floating currencies, three of fixed or pegged currencies, and three rare pairs (like the Saudi Riyal, or the Chinese Yuan), the offer is much better than that of a firm which offers 12 pairs all of which belong to major, developed economies.

Such details are especially important for the experienced trader, but the beginner can focus on the more important, basic aspects of the broker’s package before worrying about the intricacies of the various currency pairs on offer.
 

Conclusion
In our broker reviews section, you’ll find a number of the safest brokers in the market analyzed according to each of the categories established in this section. We have made every effort to make sure that you find the most realistic assessment of each firm’s offerings, so that you can form your independent judgment on their suitability your purposes. Regardless of your decision, we wish you the best luck in your new career.

Choose Best Forex Exchange Broker

Once the decision is made to start trading foreign exchange, the next step is to select a broker. So what does a broker do? Basically, a forex broker buys and sells orders on the traders behalf. Although many tout themselves as offering “commission free trades,” brokers earn money by charging a commission or a fee for their services – it’s just called “the spread,” in foreign exchange trading.

Choosing the best foreign exchange broker for your needs will mean some research on your part, but its is worth taking a little time choosing - you really need to decide a, whether the broker you choose is honest, b, the fees you will be charged and c, which broker is likely to suit your trading style and philosophy. Are you a smash and grab merchant or in for the long haul?

The Forex market is an “unregulated” market, which is unlikely to change in the near future. But there are agencies where brokers can register themselves and certain government bodies in the USA are making an effort to educate the public about foreign exchange trading. In the United States a broker can register as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) and join the NFA. The CFTC and NFA were created in order to protect the public against fraud, scams and abusive trade practices.
 

Things to consider when choosing a foreign exchange broker

• The broker is not your friend – he’s not necessarily your enemy, but it makes no difference to him how much money you make or lose, only how many trades you make and extended positions you keep open. Win, lose or draw, the broker gets paid.
• Do they have 24 hour customer support? The FX market is a 24 hours a day market – your broker needs to be too.
• How good is their customer service? Try them out before deciding, but bear in mind, their sales service may well be better than their after sales service. If possible, get a personal recommendation. By personal, I mean from someone you know personally - not the nice gentleman who posts the YouTube videos that demonstrate how easy it is to make a fortune forex trading.
• How comfortable are you with their trading platform? Many brokers offer a demo account facility that will allow you to test their platform. This is a crucial point – you must feel that you fully understand their operating software and are comfortable using it. Bear in mind using a demo account with no money in is not the same as trading for real. Which trading platform you prefer will depend on a number of factors.
• What level of commission do they charge? i.e how much is their spread?

Forex Trading Disasters

Despite the plethora of brokers attempting to persuade you that forex trading is easy, it is estimated that 95% of all day traders are losing money. The large institutional traders lose money on occasion. Usually in much the same way day traders do – attempting to recover an initial loss quickly by using a high leverage and speculating heavily. Most banks claim the traders concerned were acting on their own without authorization from the bank themselves. Unsurprising really, if the bank makes money it was authorized, if they lose, it was the result of “rogue” traders; heads roll (metaphorically) and everyone moves on, except the unlucky trader who may or may not get to spend a few years in prison and become a successful author based on the publicity.

Here are few foreign exchange trading disasters that have been in the news over the last few years. Far be it for me to suggest that most bank’s forex losses are quietly covered up and forgotten ☺ These are the ones that were too big to sweep under the rug.

National Bank Australia 2004
National Australia Bank's investigation in 2004 into unauthorized currency options trading disclosed losses of $360 million. Two of the four foreign exchange dealers allegedly responsible pleaded guilty in court, after Gianni Gray confessed to three counts of dishonesty. Mr. Gray, who worked for NAB in London, had previously been awarded a bonus of $85,000 in 2003 for his part in earning bank profits that were later discovered to be false. Luke Duffy, the head of the currency options team, pleaded guilty to three counts of dishonesty and was sentenced to 29 months' jail, with a minimum of 16 months, after he agreed to co-operate with the Commonwealth Director of Public Prosecutions. Mr Duffy handed back his $129,000 performance bonus to the bank prior to sentencing. The two traders most heavily involved in the disaster, David Bullen and Vincent Ficarra, were sentenced to 44 and 28 months jail respectively.

Allied Irish Bank 2002
All First Financial, a subsidiary of Allied Irish Bank — Ireland's second largest bank — lost US$750 million on foreign currency options trading when its trader, John Rusnak, systematically falsified bank records and documents to hide losses from speculative trades.

Rijecka Bank 2002
Croatia’s third largest bank lost US$100 million (nearly 75% of the bank’s capital) in March 2002 when its currency dealer, Eduard Nodilo, indulged in “unauthorized” foreign exchange trading to hide past losses. German bank, Bayerische Landesbank, sold its 59 per cent share in Rijecka Banka to the government for a symbolic price of US$1 shortly afterwards.

AgriBank and Incombank, Vietnam 2007
Vietnamese government inspectors blamed the central bank for losses incurred by two state-run banks that carried out foreign currency deals with Dutch bank ABN Amro.

The inspectorate found that State Bank Governor Le Duc Thuy “would take responsibility for major losses suffered by Agribank and Incombank in the course of foreign currency trading.”

Police last year blamed losses incurred by Incombank on ABN Amro and detained or jailed four of the Dutch bank's staff who were only freed after the foreign bank paid $4.5 million.

ABN Amro has consistently denied claims that it was to blame for losses incurred by Incombank, the Industrial and Commercial Bank. Police had also blamed ABN Amro for losses at the Bank for Agriculture and Rural Development (Agribank). The government inspector said that the SBV had “failed to tighten supervision of the inter-bank foreign currency market” and, “mistakes were not corrected immediately once discovered nor were the staff involved strictly punished.”

So don’t feel too bad if you have dropped a few grand forex trading – you are not alone. At least you are not going to prison – hopefully

Forex trading is a high-risk, high-reward pastime

Forex trading is a high-risk, high-reward pastime. Fortunes are made and lost every time a currency changes value. The small investor is at a disadvantage compared to the major institutional banks for two major reasons: wider spreads and under-capitalisation. The consensus amongst the professional traders is that somewhere between 80 and 95% of day traders lose money and even the majors get in to trouble on occasion. In 2002, Allied Irish Banks revealed that it lost US$750 million at its Baltimore subsidiary on spot and forward forex trades made by forex trader John Rusnak and in 2003, the National Australia Bank admitted to losses of US$1.13 billion as a result of unauthorised forex trades, although it seems any time a bank loses money, it's a result of "unauthorised," activity.

Realistically, a private individual should only enter the forex market with a bare minimum of $10,000 "risk capital," i.e money that can be lost without causing hardship, and a good understanding of the mechanisms of the market. The nature of the forex market means that the smaller the sum risked, the greater the price fluctuation needs to be before a position becomes profitable. This doesn't mean it is not possible to make money trading foreign currencies, CitiGroup would not be interested if there wasn't an awful lot of money in forex trading, but it's not necessarily as easy as some would have you believe.

Forex Scams

The forex market is largely unregulated and along with a substantial increase in retail trading, there has been a proportionate increase in scam artists, bent on parting a trader from his money. Forex, like any other investment, has the potential to lose money as well as make profit. The fast paced nature of the market and high leverage offered means that a $10,000 investment can be wiped out in a matter of seconds. The U.S Commodity Futures Trading Commission (CTFC) has witnessed a sharp rise in foreign currency trading scams in recent years and advises potential customers to be aware of the potential for fraud. Some claims to be wary of are these type. Anyone making statements like these, is probably best avoided:

• Whether the market moves up or down, in the currency market you will make a profit.
• Make $1,000 per week, every week.
• We are out-performing 90 percent of domestic investments.
• The main advantage of the forex markets is that there is no bear market. We guarantee you will make at least a 30-40 percent rate of return within two months.
• With a $10,000 deposit, the maximum you can lose is $200 to $250 per day.
• We promise to recover any losses you have.
• Your investment is secure.

Forex Trading: Risk vs Reward

Clearly, there are large amounts of money to be made trading foreign exchange. The forex market is a game in which there are many experienced, well-capitalized, professional traders who do nothing else but trade currencies full time. An inexperienced retail trader has a significant information disadvantage compared to these traders. Retail traders are under capitalized. In a fair game - one with no information advantages - between two players that continues until one trader goes broke - the player with the lower amount of capital has a highest likelihood of going broke first. Since the retail trader is effectively playing against the market as a whole - which has an almost unlimited supply of capital - he will almost certainly go broke.

The retail trader always pays the bid/ask spread making his odds of winning lower. Additional costs may include margin interest, or if a spot position is kept open for more than one day the trade must be "resettled" each day, costing the full bid/ask spread every day. Even people running the trading shops warn clients against trying to time the market. "If 15% of day traders are profitable,' says Drew Niv, chief executive of FXCM, 'I'd be surprised." Source - Wall Street Journal

The retail brokers encourage individual traders to trade extremely large positions by offering high leverages, sometimes as high as 200:1. This increases the trading volume cleared by the broker, therfore his profits, but increases the risk that the trader will receive a margin call or a closed account. Professional currency dealers - banks, hedge funds et al, rarely use more than 10:1 leverage.

The US government regulating body for the Foreign Exchange Market the “National Futures Association” warns traders in a Forex Training presentation of the risk in trading currency. “As stated at the beginning of this program, off-exchange foreign currency trading carries a high level of risk and may not be suitable for all customers. The only funds that should ever be used to speculate in foreign currency trading, or any type of highly speculative investment, are funds that represent risk capital; in other words, funds you can afford to lose without affecting your financial situation.”

Leverage in Forex Trading

Currency movements are measured in “pips” or fractions of a decimal point depending on the currency involved.

A typical example would be a currency pair like the GBP/USD. When this pair moves 50 pips from 1.9500 to 1.9550, that is just a $0.005 move of the exchange rate. With $100,000 invested, this equates to a profit or loss of $500. Therefore, currency transactions must be carried out in large amounts to take advantage of these small shifts. When you deal with a large amount of money, small changes in the price of the currency can result in significant profits or losses. Hence the leverage offered. A standard lot of this pair is 100,000. $1,000 invested and leveraged 100:1 would allow you to buy one standard lot. In this case, a 1% fluctuation will either double your investment or lose it.

Although brokers offer leverages of up to 200:1, it is not obligatory to use it. In this example, a $10,000 investment leveraged 10:1 instead of $1,000 leveraged 100:1 offers the same amount of profit/loss. A tenth of the profit compared to the amount invested, but a tenth of the risk.

How to Start Trading Forex

Starting out trading forex is a very simple proposition: sign up with an online broker, download any software, deposit some money and you are ready to trade. Most of the reputable brokerage firms have a practice account facility where they will open an account, deposit fake money into the account and allow you to start trading in real time.

Some of these same brokers are also offering to open an account and start you trading for real using a very small deposit, say $100. Even with a 200:1 leverage applied, this amounts to only $20,000 - nowhere near enough to make a forex trade. My own feeling is that these "mini accounts," are a complete waste of time and money (see leverage) and possibly just plain dangerous. In the unlikely event that you do make money with a $100 deposit and are then tempted to place a larger one, anything you learned trading at this level will not apply to a substantially larger trade. Try a practice account with one of the larger banks instead. N.B Trading on a practice account, regardless of how realistic it is, is not the same as trading for real. If it doesn't matter whether you win or lose, you will behave differently to the way you will act when money is at stake.

Forex Trading Systems

There are more Forex Trading Systems , than fleas on a dog. Fibonacci analyses of market fluctuations, "Secret Trading Formulas," "Set and Forget," with automatic trades being done. No doubt some of these systems will work some of the time, but picking the jewels from the junk is not an easy matter. Caveat Emptor.

Most Traded Currencies

1. United States dollar USD $
2. Eurozone euro EUR €
3. Japanese yen JPY ¥
4. British pound sterling GBP £
5. Swiss franc CHF Fr
6. Australian dollar AUD $
7. Canadian dollar CAD $
8. Swedish krona SEK kr
9. Hong Kong dollar HKD $
10. Norwegian krone NOK kr

Trading Concepts and Mechanisms

Currency Pairs
Currency prices can only fluctuate relative to another currency, so they are always traded in pairs. Two of the most common currency pairs are the price for euros in US dollars EUR/USD and the price for the British pound in US dollars GBP/USD.

Leverage
Most Forex brokers permit 100:1 leverage, some as much as 200:1, but also require that you have a certain amount of money in your account to protect against a critical loss point. A $100,000 position held in GBP/USD on 100:1 leverage means the trader has to put up $1,000 to control his position. However, in the event of a decline in value, Forex brokers do not allow traders to go negative. In order to make sure the trader does not lose more money than is held in the account, forex brokers employ automatic systems to close out positions should a client run out of margin (the amount of money in their account not tied to a position). If, for example, you have $2,000 in your account, and buy a $100,000 lot of EUR/USD, $1,000 of your $2,000 is tied up in margin, with $1,000 left to allow your position to fluctuate downward without being closed out.

An online trading platform will show three important numbers associated with your account: balance, equity, and margin remaining. If you have a $10,000 account and open one $100,000 position using 100:1 leverage, this has committed only $1,000 of your money plus you must maintain $1,000 in margin. While this leaves $9,000 free in your account, it is possible to lose it all if the position moves the wrong direction.

Commissions or Spreads
Brokers take part or all of the spread in all currency pairs traded. Here is an example:

EUR/USD. Prices are always quoted with both bid and offer prices ( Buy EUR/USD 1.2000, Sell EUR/USD 1.2003). That difference of 3 pips is the spread and can amount to a substantial amount of money. Because the standard lot is 100,000 units of the base currency, 3 pips on EUR/USD means $30 paid to the broker. A pip is the smallest amount the currency is traded in - 1/100th of a percent in the case of the US dollar. The currency pairs are always purchased by buying 100,000 of the quote currency , also known as the counter currency. For the pair EUR/USD, the base currency is USD, therefore 1/100th of a percent on a pair with USD as the base currency will always have a pip of $10. If, on the other hand, your currency has British Pounds as a base instead of US dollars, then 1/100th of a percent is now worth around $20, because you are buying 100,000 units of British pounds. Retail forex brokers make a lot of money without charging commissions.

Retail Forex Trading

Retail forex brokers or "market makers ," working on behalf of retail clients only handle a tiny fraction of the forex market. One retail broker estimates the total retail volume at $25–50 billion daily, which is approximately 2% of the whole market. Nonetheless, this is a substantial market for the individual trader and the ready availability of good quality trading platforms means this is an ever growing segment.

Spreads in Forex Trading

The BID price is the price at which a client can sell a unit of the base currency (in return for buying the secondary currency) and the ASK/OFFER price is the price at which a client can buy a unit of the base currency. For example, if the quote for the exchange rate of the Euro/U.S. Dollar in the market is 1.2583/1.2586, this means that the client can pay $1.2586 in order to buy one Euro (the base currency) and will receive $1.2583 if one Euro is sold. The BID price is lower than the ASK price and the difference or 'spread' between the two numbers is measured in 'pips' (3 pips here) and represents the profit of the dealing room or trading house.

Forex Trading vs Stock Market

Two of the main differences between (and some would say advantages over) the forex market compared to the stock market are:

1. Trading hours. The forex market is open 24 hours a day. Trading is done over three continents, allowing a trader to trade continuously and to react immediately to events and new developments. The market opens on Sunday evening and closes Friday night.
2. Commissions. Electronic trading and competition have brought about a sizable reduction in the bid-offer spread (the equivalent of commissions). The spread covers the risk of the market maker. The spread for the majors remain very low, but can increase as the liquidity of a specific currency drops. Despite recent reductions of commissions through online stock brokers, the Forex market is considered, by some, to have the lowest commissions relative to trade size when compared to other financial markets. This is also in part due to the 100:1 leverage offered by most trading houses. A client with a $10,000 deposit can leverage this to $1,000,000. Some electronic communication network brokerages have introduced a per trade commission alongside a narrow pip spread.

Many retail trading houses would suggest that the large size of the market makes it impossible for a speculator to affect the market. This is not quite the truth - the stakes are higher, larger quantities of money are involved, and the bigger banks spend a lot of time and effort trying to manipulate the market. Governments have been known to step in and affect prices.

Unlike the stock market, where retail clients (individuals) have access to almost exactly the same prices as all other participants, the Forex market has several different levels of access and therefore commission costs or spreads. At the top are the largest investment banking firms such as Citi and Deutsche Bank, where the spreads or the difference between bid and ask prices are tiny. These spreads are a closely guarded secret, not normally known outside the inner circles of international finance.

Further down the trading chain, the spreads become wider. Basically, the larger the volume of trades, the narrower the spread. After the major top-tier banks come the smaller investment banks, large multi national corporations, pension funds, insurance companies and, more recently, some of the major retailers. Retail traders are a small fraction of the market and may only participate indirectly, through brokers or banks.

There are many influences on the value of currency when compared to other currencies, but the Forex market is almost a pure supply and demand market. Demand rises or supply falls, prices rise and vice versa. Electronic trading is slowly increasing in the Forex market with Algorithmic trading increasing also.

Forex Trading Overview

 

Forex trading, or the foreign exchange trading market (also commonly known as FX or simply, “currency”) involves trading one currency for another. Forex is by far and away the largest financial market in the world. Trades are made between large banks, central banks, currency speculators, multinational corporations, governments, and even the other financial markets. According to The Bank for International Settlements (BIS), a world-wide central bank organization, the average daily trade in the global forex and related markets is currently over three trillion US dollars – A DAY. This is several times larger than all the U.S stock markets combined. The trading is done from all round the world, with little or no hard cash changing hands.

Forex Online Trading Software: Trading futures with BEST Direct 8.0 is easy

Commodity Forex Online Trading
Regardless of your trading style, BEST Direct ½8 gives you a complete and effective platform for futures commodities trading with a forex account as well as providing options and derivatives trading. The depth-of-market (DOM) panels offer a dynamic way to view the market and place trades, including advanced order entry such as trailing stops and profit targets. The Trade Window gives a complete view of account information and an intuitive order entry ticket with OCO orders, while the flexible workspace lets you mix and match the platform views that you want. Features of BEST Direct 8 include:

• Trailing stops and profit targets
• OCO orders
• Depth of Market Trading Panel
• Trade window with complete positions summary, trade panel, order history, and real-time account status
• Strategy window
• Immediate access to your existing web.com trading account or demo account
• Sortable order management panels that can be filtered by product or by order status
• Flexible workspace that lets you build the trading environment you are most comfortable using.

Commitment to Customer Service
BBB are globally renown as leading futures brokers & forex brokers for high volume clients. The TripleB customer service team has a strong blend of experience, professionalism, and technical skills to assist clients with questions about their accounts or any of the BEST Direct ½ platforms. They will help get you started with your futures trading account and will work with you until you are comfortable with all aspects of the trading platform.

Forex Broker: MGforex Review

Background
Founded in 1992, MG Financial is one of the oldest institutions in the retail forex market. The firm is headquartered in New York, and registered with the NFA with ID number 308808. The first version of MG Financial's trading platform was released in April 1997, at a time when many of today's forex firms were not in existence yet. MG financial is one of the most reliable forex brokers in the market, with years of experience and a perfect track record of courtesy and reliability towards their customers.

Unique Features of Trading with MGforex
The most unique feature of MG Financial is its commitment to innovation and technological advancement. MG Financial has a team who work hard to keep the clients supplied with the most cutting-edge analytic tools in the forex industry, and the firm prides itself on the abilities and qualities of its staff who work tirelessly to offer a better experience to customers.

One of the interesting results of this innovation process is the Alert!FX which sends personalized alert messages to the mobile phone of a user, ensuring that he's up-to-date with the markets even when he’s away from the computer. Charting tools and the trading screen can also be reached by the use of a mobile phone or PDA.

Account types
MG Forex offers individual, joint, partnership and corporate accounts, along with special options for money managers. The firm does not seperate standard and mini-accounts, clients can trade both fractional and standard units starting with 0.1 unit in standard accounts. The minimum deposit size is $500, with a recommended minimum of $1,000 in order to better accommodate margin requirements and spreads.

The base currencies are USD, Euro, Japanese Yen, the British Pound, Swiss Franc, Australian and Canadian Dollars. This diversity of options facilitates cheaper withdrawals, and negates costs involved in base currency conversions. Spreads are at the low side, with 3 pips for EUR/USD and 4 pips for USD/JPY.

MG Forex offers its clients a leverage of 100:1 which is standard for NFA regulated brokers.  As part of your strategy, keep in mind that increased leverage, increases risk.

Deposits and Withdrawals
MG Forex accepts deposits in all seven currencies via wire transfer, and accepts U.S. dollar deposits by check, credit card or Paypal.

Withdrawals are possible by check or wire transfer and with a $15 fee incurred for each withdrawal beyond the first one in a single month.

Trading Platform
MG Financial’s trading platform, the Deal Station FX, allows orders to be placed directly from the charts, reducing the time and complexity of the process. The platform also supports the integration of fundamental analysis into the technical aspect of trading through the use of plug-ins including an economic calendar. News flow is provided by forexnews.com, MG Financial’s associated news & analysis website, the commentators of which are regularly interviewed by the Financial Time, Bloomberg TV or the Wall Street Journal.

The Deal Station platform implements advanced features like one click trading, trailing stops and the modification of open orders in real time. In order to smoothen the learning process, every function of the platform is explained with both text and graphics in an interactive and searchable mode.

Finally, the platform is highly compatible with MacOS, Linux and the Windows operating systems.

Security and Privacy
Apart from its status as a registered and regulated brokerage firm, in 1998 MG Financial became the first foreign exchange market maker to obtain fidelity bond insurance. Issued through the subsidiary of a NYSE company, the insurance protects the assets of the firm from fraud and embezzlement by its employees.

Customer Support
With 24 hour support by phone (during market open hours) available in multiple languages, servicing clients in about 100 nations worldwide, the customer service department of MG Financial is one of the crown jewels of the firm. MG Financial’s support inculcates its own culture of respect and patience to every new entrant into its ranks, making sure that each and every client is treated with the same value that they deserve, regardless of account size or trading record.

Conclusion
MG Forex is perhaps not the best choice of a beginner. The lack of a mini-account, relatively high initial deposit requirements may complicate the beginning stages of the education of a new trader. On the other hand, the relatively low amount of maximum leverage allowed, at 100:1, will help the trader to suffer less from the problems associated with high leverage.

If you’re a relatively experienced trader who’s looking for a trustworthy, friendly, and serious broker where you can improve your skills to the next level of professionalism, MG Financial is probably the best choice for you. This firm is committed to providing the most advanced and sophisticated tools to those who require them, but that naturally makes the experience of the novice a bit more harder.

MG Financial is a large, old and reliable institution regulated by U.S. financial authorities. Its quarter century long history is a rarity among forex brokers. If you’re looking for a serious institution where you can achieve your maximum potential, MG Financial will be your choice broker.

Forex Broker: Easy Forex Review

Founded in 1999 by a group of bankers with years of experience in forex and international banking, Easy Forex Inc is a forex broker headquartered at Limassol, Cyprus with international offices in Chicago, London, Manila, Melbourne, Sydney, and Tel Aviv. As a global operation, the firm has licences in Australia (ASIC AFSL 246566), and the EU (CySec 079/07). In the US Easy Forex is registered at the CFTC, and is also a member of the National Association of Futures Dealers (NFA).

 

Unique Features of Trading with Easy Forex
As a pioneer in the retail currency trading business, Easy Forex has implemented innovative solutions to a number of issues related to online currency trading. Their trademark Inside Viewer tool lets traders examine the positioning of Easy Forex clients, in terms of the popularity of currency pairs, open deals structure, and deal direction (buy/sell). In addition the Trade Controller tool is unique to Easy Forex, and offers traders a clear picture of profit/loss scenarios through visual displays.

Easy Forex pledges to realize stop loss orders at the exact rate specified by the client. Buy and sell orders are automated, with no delay in execution. There’s also a freeze rate facility which will either accept or refuse an entry within a few seconds, in order to ensure that connection problems do not lead to faulty trade executions.

Unlike most other brokerages, Easy Forex also facilitates accounts in 12 different base currencies.

Account types
Easy Forex provides both a standard account for more experienced traders, and a mini account for beginners, apart from various other types of packages on special terms and conditions. The minimum initial deposit requirement is 200 USD and the minimum transaction size is 2,500 USD.

Easy Forex offers leverage options at 50:1 and 200:1 (except in the U.S. where the NFA has capped it at 100:1) in addition to tailor-made packages for the customer. Whatever leverage you choose, please understand that the higher the leverage, the greater the risk. The firm offers mini accounts for new traders apart from the standard one offered for those with years of experience in forex trading.

In addition to forex, Easy Forex clients can trade gold and silver, with oil also being available to non U.S. based traders.

Deposits and Withdrawals
Easy Forex is very flexible about client deposits and withdrawals. Deposits are accepted via credit card, paypal or bank transfers, and no commissions, fees or spreads apply during withdrawal to a credit card account.

Trading Platform
Easy Forex now offers a MetaTrader4 trading platform that grants the user 24/7 access. Trading is available from 06:00 Monday Sydney time until 17:00 Friday New York Time, covering the entire market action without restrictions. The multilanguage platform can be customized to operate in languages including English, German, Arabic, Greek, Russian, Chinese, Spanish, French, Polish and Hebrew. The trading software doesn’t require the download of any additional application, eliminating many security-related concerns. In addition, and in harmony with the industry-wide move toward complete automation of trade execution, Easy Forex offers its clients an online trading experience that completely eliminates the need for a dealer desk, or other intermediary.

The platform provides real time updates of the trader’s account, with slippage minimized to the maximum extent. The firm’s official policy with respect to slippage is simple and straightforward, in their words, “what you see is what you get”.

The trading software comes with the standard supporting tools including charting services, economic info and indices, and technical analysis tools, which are all implemented as part of the basic package. The economic information is supplied by the world’s most trustworthy and reputable news agency, Reuters.

To ensure 24/7, 365 days a year uninterrupted client access to the platform, Easy Forex operates server farms in both the U.S. and the U.K.

Beginner’s Education
Easy Forex offers live training by phone, guided video tours, online chat services, and a comprehensive info center to smoothen the beginner’s experience with forex trading. The support service is renowned for its professionalism and friendly attitude.

Apart from the customary demo accounts that is a standard feature of the industry nowadays, Easy Forex offers a one-on-one training scheme to accompany their demo accounts..

Security and Privacy
In order to ensure the security and privacy of client data, Easy Forex cooperates with Verisign, one of the powerhouses of the internet security and data encryption business. Credit card clearing services are provided by Barclaycard, once again one of the most reliable firms in the financial services industry.

Easy Forex is a transparent firm audited by financial authorities of the nations where it has branches. Internal auditing is performed by HLB Afxentiou & Partners, a worldwide organization that is a member firm of HLB International.

With a history reaching back 50 years, HLB ranks among the top 15 accounting and business advisory groups worldwide, with more than 1,340 partners and 10,900 staff in 450 offices.

Conclusion
We recommend Easy Forex for the user friendly nature of its trading platform, the warm attitude of its support staff, and the advantages of its account packages. Great customization opportunities, reliable servers, and trader-friendly order execution policies make Easy Forex one of the best brokerage choices for the beginning trader.

With international visibility, a sound financial structure regulated in three corners of the globe, Easy Forex is one of the more trustworthy and accountable firms in the forex industry. Established in 1999, the firm has been one of the earliest pioneers of retail currency trading, and it is also one of those that have been untainted by scandals or corruption issues. Regulated, audited and certified, Easy Forex is there to help you avoid the headaches associated with the shady undergrowths of the retail currency trading business.

Forex Broker: eToro Review

eToro is a new and innovative firm that offers its more than 50,000 clients from all parts of the world an innovative and even fun approach to trading. The American branch of the firm, eToroUSA is an online platform operated by Tradonomi LLC that was established for the purpose of introducing prospective traders to U.S. regulated brokers. Tradonomi LLC. is registered with the CFTC and is a member of NFA (ID:0382918).

Unique Features of Trading with eToro
The eToro forex trading platform is designed for traders with little or no experience in trading currencies. eToro’s website states explicitly that the company aims to specialize in the retail section of the forex market. Thus the firm offers the best tools for facilitating the new career of the beginning trader with the most accommodating and user-friendly approach. The eToro philosophy has the goal of connecting the international world of finance and currency trading with the retail trader at the most basic level.

Account Types
Since many beginning traders have little understanding of the forex market, in order to help its clients manage risks better, eToro requires a very low $50 minimum for account deposits, with leverage options beginning at at 10:1 and reaching to 400:1. Beginner's should be aware that increased leverage means increase in overall risk.

To abide by the rules set fort by the NFA, eToroUSA offers levarge at 100:1.

Deposits and withdrawals
eToro is very flexible about client deposits. MoneyGram, WesternUnion, Neteller, PayPal, WebMoney are accepted channels for account funding , along with the standard credit card deposits and wire transfers. The minimum deposit with a credit card, PayPal, Neteller, WebMoney or Moneybookers account is $50, and it is $500 with WesternUnion, MoneyGram, and wire transfers. The eToro website offers extensive help and guidance on client deposits. Withdrawal of funds is equally easy, and the filling and submittal of an online form is the only necessity.

Trading Platform
eToro’s trading platform is the most unique in the forex universe. The game like interface, currencies that run marathons, pull ropes or wrestle with each other, the cowboys and sumo wrestlers who fight as your trades move into the red or black, all bring a whole new experience of entertainment and excitement to currency trading. We all know that stress is one of the vicious enemies of a trader; eToro aims to eliminate, or at least reduce the stressful aspect of currency trading with this innovative approach to trading. In order to avoid overwhelming a beginning trader with a vast array of charts and tools for which he will have little use, eToro’s platform is kept clean and clear, with only the most important data displayed to help the trader evaluate market developments better. The most important feature of the eToro forex platform is its user-friendliness: an uncluttered screen helps the trader focus on the price action itself while using low leverage and risking little, until he is able interpret the numerous conflicting signals generated by the bulky technical packages offered by other firms. The trading platform is updated regularly, as the firm is committed to bringing the retail forex community the most satisfying experience through the most up-to-date software in the market. Finally, to ensure that the trader doesn’t suffer unexpected large losses due to neglect or anxiety, the platform will automatically enter a stop-loss order on any new trade that is ordered.

Beginner’s Education
eToro is committed to bringing the easiest and most rewarding forex trading experience to beginners. As such, it offers numerous online tutorials, trading guides, along with the usual demo account. Since eToro is also a community with an active online trading forum, with features public and private chat opportunities, along with extensive networking capabilities, the beginning trader will have more than enough choices for the tools he will use to better his skills. The support staff, forums, and numerous online guides and tutorials contribute to a quicker learning period for the beginner. Since the firm’s stated purpose is to help the beginners get used to trading with the shortest and lightest trouble, there is a wide array of tools with which the beginner can improve his trading skills.

Security and Privacy
To ensure the safety of customer funds, eToro uses industry standard Secure Socket Layering (SSL) technology for encryption of data. eToro doesn’t share crdit history, net worth, or other related income data with any other institution. Operated by leading online forex brokers, the technical staff who develop and innovate on the eToro platform is committed to bringing you the best spreads with the most precise and timely trade executions.

Conclusion
eToro is certainly one of the best offers in the market for the beginning trader. Flexible leverage options, a very low minimum deposit requirement all ensure that the inevitable failures of the beginner can be accommodated without suffering. The user-friendly, fun, and exciting presentation of the eToro trading software may reduce the stress that you’ll suffer as you get used to trading. It’s hard to laugh when your trading strategy or method is proven to be wrong, but with eToro, you’ll always be able to take it easy, just as you should. As the emotional burden of trading is reduced, the beginning trader can concentrate on honing his skills, and refining his methods: there’s no other approach out there that will contribute more to this aspect of your career. Obviously, an experienced trader will have less need of some of the most striking advantages offered by eToro. Still, even the seasoned traders should give eToro a chance to help alleviate the stress of trading: a light attitude, and good humor are always good in life, whether you’re a retail trader of forex, or a trader of the fortunes of humanity, like the US President.

Forex Broker: CMS Forex Review

Background
CMS Forex was founded in 1999 by a group of forex professionals, software engineers, and traders. The present CEO of the company Vera Hawkin, is a Russian immigrant with a Master of Engineering degree in Elecronic Engineering, and a Master of Science degree in Applied Mathematics. She holds some patents in multiple nuclear reactor safety system designs.

The firm is headquartered in New York, with offices in Boston, London, Tokyo, Shanghai, Bermuda and St.Petersburg. CMSFX is a fully regulated company in accordance with the rules of the CFTC, and is a member of the NFA as well as the FSA in the U.K.

We here at ForexTraders refer our visitors to the U.K. platform because CMS Forex U.K. offers; a smaller minimum deposit requirement, gold and silver, permits hedging and greater leverage but keep in mind that the greater the leverage, the greater the risk.

Advantages of CMS Forex
CMS Forex is a straightforward, strong company which focuses more on service than marketing. The most salient advantages of trading with this brokerage the ability to trade micro lots with minimal risk, hedging is allowed in the U.K. version and the relatively low initial minimum deposit requirement at $200. The great customization options available also set the company apart from much of the competition in the business.

Trading Platform
CMS Forex provides its services through its own trademark VT Trader platform. The advantages of the platform include:

One-click trading directly from the forex charts

• High customizability, including the ability to create one's own auto-trading strategies.
• Wealth of technical tools with more than one hundred indicators available for analysis
• Risk management options including the Trade Guardian system, and trailing stops.
• Automated pattern recognition which scans the chart and draws patterns for the trader's use
• Automated trading choices through the Forex Autopilot system
• News flow through the acclaimed DowJones Newswire service

In order to avoid stability and connectivity issues, CMSForex maintains a large number of redundant connections, and a highly competent technical staff to deal with any arising issues rapidly.

Apart from the VT Trader 2.0 platform, CMS Forex provides the MetaTrader 4.0 forex trading software to retail clients, and the TradePort system to institutional traders.

Market access is available between 5:15 p.m. EST Sunday, and 4 p.m. EST Friday except on U.S. holidays. Spreads are as low as 1.4 pips for the most liquid pairs.

Deposits and Withdrawals
The minimum deposit amount at CMSFX is 200 currency units for both Euro and USD deposits, and 40 for Australia, Canada, New Zealand Dollars, and the Swiss Franc. These values are independent of exchange rates. Deposits by wire transfer, PayPal, BPS, and Online Check are accepted. With online credit card deposits, funds are credited to your account immediately. Check deposits take between eight and ten days before being available for trading, while all the other options are processed in 1-5 trading days.

You can withdraw your funds via check, BPS, or wire transfers after completing an online form. The process takes between 2-3 business days and the check option is available to residents of the U.S. or Canada only.

Account Types
CMSFX is one of the more flexible brokers in the forex business, providing three types of accounts in a single package. A Universal Account opened at CMS Forex facilitates trading in standard, mini, and even micro lots from the convenience of a single, combined interface. Upon meeting some basic qualification requirements, a trader is able to enter any combination of standard $10,000, mini $10,000, or micro $1,000 lot orders in accordance with his trading strategy. U.K. regulations permit forex hedging, and allow leverage at up to 400:1, so traders with a preference for hedging or higher leverage will enjoy this additional advantage of CMS Forex U.K.

CMS Forex has a separate package for institutional clients. Highly customizable special options are available to active self-traders, professional traders, and money managers. Managed account services are offered through partnerships with third parties.

Safety and Security
CMS Forex has been active in the brokerage industry for more than ten years, and it has a good reputation among traders and dealers alike. The broker is a member of the FSA and the NFA, and is subject to the rules and oversight of the Commodities and Futures Trading Commission (CFTC). CMSForex is committed to holding client funds at the most reputable and safest financial institutions of the nation. Although forex clients' funds do not benefit from FDIC guarantees, careful scrutiny of partner banks ensures that clients receive the greatest protection against any unexpected developments.

Customer Support
CMSFX Fundamental analysis is provided on a regular basis through the Forex Capsule system of the broker, with each week's events condensed and made available to clients in easily accessible archives. The company provides expert commentary and a video recap service on a daily basis, in addition to frequent technical updates and webinars.

CMS Forex' technical support and dealing desk are available 24 hours a day. Customer relations are handled by an multilingual staff, with account representatives fluent in English, Spanish, Russian, Arabic, Japanese, Mandarin and Cantonese interacting with clients in accordance with CMS Forex' strong work ethics.

Conclusion
CMS Forex is one of the hidden gems of the forex business. In spite of its somewhat low profile in the advertisement world, it has all the necessary qualifications of a potentially excellent forex broker. It is regulated, U.S. based, and has been in operation for more than ten years, all of which point to a company that has an intention to stay active and build a customer base through solid practices. Its trading platform boasts more than 100 indicators, more than even the best of some of the most popular technical software in today's forex world. Clients of the firm have access to excellent auto-trading tools, and risk management software. Since the company develops its own trading platform, problems that arise can be quickly addressed by the technical staff, without the need to resort to the help of third parties.

Excellent customer support services, backed by fundamental tools, and daily updates by market professionals make VT Trader one of the best brokers in the business today. The spread can be as low as 1,4 in the EURUSD. Coupled with the revolutionary universal account scheme, it is another reason to be enthusiastic about the broker.

In sum, VT Forex is an excellent firm with hardly any disadvantages. You may or may not choose them to be your broker, but you would definitely not regret giving them a try.