How to get an edge in forex trading?
December 21st, 2009Lets start with the obvious – ensure you do proper research into your trade, practice using a demo account, ensure correct risk management (stop losses) and as importantly, ensure that you are trading with a reputable broker who will treat you with the respect you deserve and wont fool around with you when it comes to execution or even worse, withdrawals!
These are well known. However I wanted to introduce a relatively new concept to this business – the world of CFD
As an industry this is still in its infancy, but its growing all the time. There are a few companies out there that provide a pip rebate services. By this I mean that if you register with them, then open an account with one of their chosen brokers, they will pay you a trade by trade cash, or “pip” rebate on every trade you make. These payments are made to you on a monthly or quarterly basis.
Sounds too good to be true? For once it isn’t. Heres how it works:
The pip rebate company, has negotiated with various brokers a referral, or introducers fee for every client they bring to that broker. Some referrers take a one off payment for every client they open – this is how many broker comparison sites make their money. However, these pip rebate firms instead receive a revenue share of your spread. For example, if you are paying 3 pips spread on Euro, they may receive an introducing fee of 0.5 pips. Whilst most introducing brokers hold on to this share of the spread for themselves, pip rebate firms will rebate back a portion of that direct to you.
So for example, if you were to trade 100 lots per month, and the rebate rate was 0.25 pips, you would get an additional $250 per month. Thats a potentially massive increase in your revenue. One study suggested that for a regular traders it would increase your revenue by 5% a month. Put it another way, you are 5% up before you even have started trading!
A client opens their account in the normal way, normally via a link on the pip rebate site taking them to their chosen broker, at which point the client follows the usual interaction with the broker. The pip rebate firm does not obtain any personal or private information, the only info it gets from the broker is confirmation you have opened, your account number and your monthly trade volume. It needs this to rebate you back!
The company has a wide reach of contacts within the Forex and CFD market and as such is able to command the best deals from a far wider range than its competitors. New brokers are being uploaded all the time, and it welcomes suggestions from its clients as to additional brokers it should add.
As well as a guarantee to match any existing rate, it is launching trading games and prizes for all its members to participate in, meaning that not only do you reduce your trading costs, thereby increasing profit (or reducing losses!), you also have the chance of additional cash prizes on a monthly basis! Take a look and be sure to post any comments about their services or that of others – watch this space!
The Chance To Profit In Both Rising And Falling Markets
December 20th, 2009Equity markets follow rising and falling trends (cycling between Bull and Bear markets), but the Forex market does not suffer this cycling which comes from structural bias in the market.
World currency trading always involves two currencies so that if you are down on one currency then you are up on the other. There is therefore always the potential for making a profit whether the market is rising or falling.
Low Trading Costs
December 20th, 2009In many markets, like the equity market, traders not only have to pay a spread (the difference in price between buying and selling a stock) but also have to pay a commission to the broker. On small trades this commission can typically be about $20 and this can rise rapidly to over $100 for larger trades.
Because the foreign currency exchange market is a wholly electronic market many of the traditional trading costs are eliminated and you are in affect reduced to paying nothing more than the spread. In addition, the extremely liquid nature of the global currency exchange market means that spreads are normally much tighter than those seen in other markets.
How does one profit in Forex?
December 20th, 2009Very simple and obvious: buy cheap and sell for more! The profit is generated from the fluctuations (changes) in the currency exchange market.
The nice thing about the FOREX market, is that regular daily fluctuations, say – around 1%, are multiplied by 100! (in general, Easy-Forex™ offers trading ratios from 1:50 to 1:200). If, for example, the exchange rate of “your” pair of currencies increased by 0.6% in the last 4 hours, your profit will be 60% on your investment! Such can happen in one business day, or in a few hours, even minutes.
Moreover, you cannot lose more than your “margin”! You may profit unlimited amounts, but you never lose more than what you initially risked and invested.
You can implement your choice (the pair of currencies, the volume amount) under any direction to which the market is moving, and yet make profit. It does not matter whether the exchange rate is going up or down: you can always decide to buy Euro and sell dollar, or vice versa – buy dollar and sell Euro. You don’t have to physically possess certain currencies in order to perform “buy” or “sell” with them.
Mini Forex Account or Forex Simulator
December 20th, 2009I highly recommend you try a forex simulator if you are trading for the first time to get a hang of it. You can search on the internet for free forex simulator.
Once you get the hang of it, I recommend you open a mini forex account. With a mini forex account, you can start trading for real money with as little as 100 US dollars. An reason is if you do not have enough money to open a regular forex account since there usually is a minimum of at least US $5000.
A mini forex account works exactly the same as a regular forex account and it is a good way to start learning and making mistakes since your losses are minimum
If you want to learn forex trading, the 2 tips above can help shorten your learning curve and your losses.
Forex Trading Education
December 20th, 2009I firmly believe a forex trading education is necessary. Forex trading is inherently a technical game and you need to have a basic grasp of financial and forex terms before you start trading forex. Examples are terms such as pivot point, ask and bid price, bid/ask spread, limit and stop order etc.
There are plenty of free forex trading courses and tutorials online so you do not really need to pay any money when you start learning forex trading.
Once you have a bit of experience and trade in the forex market for a while, then you can buy intermediate to advanced forex trading courses such as the forexmentor course.
Learn Forex Trading
December 20th, 2009Do you want to learn Forex Trading? Maybe you have heard from your friends and family that so and so has made millions of dollars each year trading forex and you want a piece of the action and the money too.
Well, let me first say that making money trading forex is possible but there is a learning curve involved and most people probably will end up losing money at first. I like to call it a lesson learned by paying your fees, in this case your money.
Don’t get me wrong but from my experience, I learned by making a lot of mistakes and losing money. From there, I realized the mistakes I’ve made and gradually start to make a profit after years of practice.